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The Market Has Not Always Been The Best Place For Your Money – DIA, SPY

djia.1964-1982

The DJIA (above) did jack between 1964 and 1982 – that’s 18 years to be asleep at the wheel. It started at 850 and ended at 850. Hell of a ride though. Click chart to enlarge.

djia.1999-2010

The DJIA (second chart) did jack between 1999 and 2010 – another 11 years siphoned off. It started at 10k and is still at 10k. Another great ride too. All you had to do is pay all your management fees. Click chart to enlarge.

The S&P 500 repeated similar patterns between 1968 and 1980 and between 1998 and today, 2010. So as smart and nice as he might be, and as successful a company he’s built, I wouldn’t buy a Vanguard fund because John Bogle reminds of you your grandfather.

If you don’t have a sense of history and challenge all the crap you hear, it’s no one’s fault but your own if you don’t reach your financial goals. That’s why I became a trader. No one is going to care about my money more than me. Don’t kid yourself by believing differently.

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  • synhawk

    While I agree with your premise, it may be more accurate to include results for dividend re-investment of these vehicles. This is where commodities and equities diverge in terms of costs/benefits to carry, and I think it is a component of why equities tend to not trend as well (particularly weighted index funds) compared with traditional commodities.

  • martinkronicle

    You don't buy stocks for dividends. If you need income, buy bonds or
    rental-income property. You trade assets to net capital gains. People
    were buying Enron all the way down, because the computer showed 10% +
    yield. If you happen to be long as of the Record Date, then that would
    be incidental. You can trade spreads to capture the carry charges.

  • synhawk

    You and I (medium term traders/speculators) may not buy them for dividends but that doesn't mean they aren't a significant component of total return for the S&P 500 (a weighted aggregate) index. There are many professionals who do, however, consider broad index yields when timing the market in relation to “safer” fixed income yields (particularly treasuries). They like to own stocks when the risk premium for the yield they *think* they will get in the future is significantly more than fixed income alternatives. I believe we both prefer to let price do the talking versus derivatives of it or other distractions but I do believe there is some statistical merit to the claims of the bogleheads of the world who point to total return over long periods of time as a reason they like to be long term investors in equity markets in general.

  • martinkronicle

    If I get a 3% yield on my overall stock portfolio over 18 years, I will
    have lost money wrt fees and inflation. That's the point I'm trying to
    make. Dividends are effectively a “head fake” as far as I'm concerned
    for both traders and investors.

  • synhawk

    3% annual yield, yes this is probably close to correct, I believe historically over longer periods of time 40% of the total return of the S&P is due to dividend yield, so that would be it somewhere in the 3-5% range on average. I agree with you though, there are better (on a risk-adjusted basis) ways of turning a buck. I was just indicating that looking a long term stock (index) charts, we should consider dividend yield. Anyway it is looking like another big macro move is brewing for us trend following types after, on an aggregate basis, a relatively lack-luster 2009 (and spectacular 2008). Keep on the good work Michael, I enjoy stopping by your site daily!

  • synhawk

    3% annual yield, yes this is probably close to correct, I believe historically over longer periods of time 40% of the total return of the S&P is due to dividend yield, so that would be it somewhere in the 3-5% range on average. I agree with you though, there are better (on a risk-adjusted basis) ways of turning a buck. I was just indicating that looking a long term stock (index) charts, we should consider dividend yield. Anyway it is looking like another big macro move is brewing for us trend following types after, on an aggregate basis, a relatively lack-luster 2009 (and spectacular 2008). Keep on the good work Michael, I enjoy stopping by your site daily!