The Dow Jones has averaged near-zero returns since 1966

[tony m]

Very short, simple to understand article with graphs. Used mutual funds as the example, which are in 401k's.

After fees, taxes, and inflation adjusted - your $950 invested in 1966 is currently worth today, well about the same.

* * *

Let’s begin with the myth that the stock market has averaged 9 percent returns since forever. Its often quoted as a reason why its almost impossible to lose money if you buy and hold stocks. I disagree, and this article has some pretty basic analysis to show that maybe the stock market isn’t so great.

The Dow Jones Industrial Average is a basket of stocks with some doctoring of the numbers to adjust for dividends, stock splits and so on. Let’s see how it did since 1966.

Let’s imagine we bought the entire index in form of a mutual fund in 1966, for the low-low price of 950 bucks. I say mutual fund because everyone’s 401(k)’s are in mutual funds, so this is primary means that an ordinary person will invest in the stock market.

http://shadesofthomaspaine.wordpress.com/2012/12/08/the-dow-jones-has-averaged-near-zero-returns-since-1966/

That clarifies it. What this graph pretty clearly shows is that from 1966 to the present, investing in the Dow was a money-losing proposition. For the brief dotcom boom of 1996-2000, the stock market was a great deal, more than doubling in real value, AFTER taxes, fees and inflation. Excluding these couple years, though, the stock market has been a money-losing machine for nearly 50 years. In the past 13 years, the market lost 25% of its value between taxes, fees and inflation.

So, I’m not sure where the stock market cheerleaders get their numbers, but mine tell a very different tale.

[Doc]

Well, It's a very interesting article, but I have to wonder how it is that my entire retirement living is being funded by the stock market, and I am living quite comfortably. And I'll bet I am not the only one doing that. Over the years I have already drawn out much more than I ever put in (fees, taxes, and all), and have had my accumulated retirement investments continue to grow. How does that happen if there has been zero growth over the decades?

[tony m]

Look at how much a person put's in. And with the outcome, can you purchase the same amount of, and quality of goods and services that have existed over that span?

His example to demonstrate the loss is with the corvette. How much more currency do you have to hand over now, to get a top end corvette, or even that same corvette. Advanced technology in the vehicle is actually a very minimal cost. So if you purchase it, did a big junk of your return disappear?

Remember, unless a person is well to do, the average person is just about locked into having the choice to only hand over enough currency to afford inferior goods and services as decades earlier. Chinese break apart furniture, GMO food, power tools and appliances that break after a couple years. People purchase less quality these days, because they have to in order to make ends meet.

Purchase the same quality as before and the return drops further.

His example demonstrates the loss of purchasing power and goods quality, over time, doesn't put you much further, if at all.

Are you counting only 401k as his example, or are you including in your comfortable living, any other investments, any pensions and social security if applicable?

[Nomad]

I'm not that smart a guy or investor, yet by stocking away as much as we could into 'the market', we are at a point where some years we earn more in the market then at both our jobs I'm pretty happy with that. Sure we dropped a lot in '08 but we're far ahead today.Not to long ago I put 2/3's of mine into a fixed 4% general act. and half of my wifes 401k into a low rate fixed acct. took some money off the table as they say, getting near retirement.

And yes thats a fixed 4% return guaranteed for 5 years ,its through hartford and part of my 457 plan.My 457 has well over double what i put in spread out over 23 years .

I did not yet read the article, i just know some folks get pissed when they find out what we got.

Not sure where i was supposed to put our money but I'm ok with that.

I think people buy junk today because they want EVERYTHING and many of each.

We had 1 TV, one phone in the house a party line at first, my Mom saved money in envolopes for kids, clothes, fish fries,xmas gifts and so on.She sewed our clothes, canned food, grew foods lol.they had to save years to have the driveway paved. All of my Dads hunting gear could fit in a shoe box......plus one coat,pair of boots and 2 guns.Same guns he had since he was a kid.

Today ? 4 TV's cable, 4 cell phones,internet, 3 computers, tablets,DVR's giant houses, dinner out , $1,000 bows and guns 6 treestands 3 sets off camo range finders and on and on. We had 5 of us in an 1,100 square foot house and were happy. Today first timers are buying 2,500 square foot homes then,"moving up" when they have 2 kids....

[Doc]

Look at how much a person put's in. And with the outcome, can you purchase the same amount of, and quality of goods and services that have existed over that span?

His example to demonstrate the loss is with the corvette. How much more currency do you have to hand over now, to get a top end corvette, or even that same corvette. Advanced technology in the vehicle is actually a very minimal cost. So if you purchase it, did a big junk of your return disappear?

Remember, unless a person is well to do, the average person is just about locked into having the choice to only hand over enough currency to afford inferior goods and services as decades earlier. Chinese break apart furniture, GMO food, power tools and appliances that break after a couple years. People purchase less quality these days, because they have to in order to make ends meet.

Purchase the same quality as before and the return drops further.

His example demonstrates the loss of purchasing power and goods quality, over time, doesn't put you much further, if at all.

Are you counting only 401k as his example, or are you including in your comfortable living, any other investments, any pensions and social security if applicable?

Your example with the Corvette and other products is just a long way of admitting that there is such a thing as inflation. But that is not a product of the investment community. In fact, if you are to stand a chance of beating inflation, the market is the only way to do that. Like I said, I have absolutely no other income other than the market, and I have been living off that with the net worth being much higher today than it was back when I was working. That is to say that I have been withdrawing my annual expenses and still the value of my portfolio is rising. If I look at the charts and graphs in that article, you have to admit that that would virtually be impossible. And believe me, I am not the only one doing this .... lol.

My investments in my post-401K days have been in the same kinds of mutual funds that my 401K was invested in (a well diversified portfolio), and it has been growing in a very substantial way over the long haul. Far better than if I had simply stuffed my savings under my mattress .... lol.

Now I will admit that there is smart balanced investing, and wild speculative investing, and each has opposite results. But that is not the fault of the system, but rather the faulty use of the system. I don't think you are aware of how many people use the stock market successfully to fund their retirement. It really has become the mainstream method of financing retirements.

Yes, there are all kinds of gold peddlars and those hawking precious metals for their own personal gain. And they have plenty of motives for conjuring up phoney stock market charts and graphs to bolster their sales. But don't be fooled. Those shysters will lead you down the golden path to financial ruin.

[nyantler]

All your graph would only work if your total investment was just $950.. but in most cases it doesn't work that way... especially in the case of a 401K where you are contantly adding to the investment.. you may be getting still 9% returns but 9% on a greater amount than $950.. the amount compounded over time could produce substantial numbers based on what you are contributing + your past earnings + your 9% average annual return.

[Lawdwaz]

Look at how much a person put's in. And with the outcome, can you purchase the same amount of, and quality of goods and services that have existed over that span?

His example to demonstrate the loss is with the corvette. How much more currency do you have to hand over now, to get a top end corvette, or even that same corvette. Advanced technology in the vehicle is actually a very minimal cost. So if you purchase it, did a big junk of your return disappear?

Remember, unless a person is well to do, the average person is just about locked into having the choice to only hand over enough currency to afford inferior goods and services as decades earlier. Chinese break apart furniture, GMO food, power tools and appliances that break after a couple years. People purchase less quality these days, because they have to in order to make ends meet.

Purchase the same quality as before and the return drops further.

His example demonstrates the loss of purchasing power and goods quality, over time, doesn't put you much further, if at all.

Are you counting only 401k as his example, or are you including in your comfortable living, any other investments, any pensions and social security if applicable?

So Tony, where do you suggest we invest our money to get a better ROI than the market?

[fasteddie]

My wife and I are getting our SS as well as drawing monthly from investments . We have a time share in Williamsburg , Va and one in Branson , Mo .. At 71 years of age , i'm not doing too bad ! WE have a great investment counsellor that has done well for us .

The big helper was putting money from my paycheck into a 401K instead of taking it as pay . And no .... I won't adopt any of you !

[Lawdwaz]

My wife and I are getting our SS as well as drawing monthly from investments . We have a time share in Williamsburg , Va and one in Branson , Mo .. At 71 years of age , i'm not doing too bad ! WE have a great investment counsellor that has done well for us .

The big helper was putting money from my paycheck into a 401K instead of taking it as pay . And no .... I won't adopt any of you !

Oh come on Uncle Eddie, you have room for ONE more, don't you?

[Zag]

I agree with everyone but Tony. I'm pretty experienced with investment options and have seen the value with most retiree's I know. Next you will tell us cd's are the place to be..