Discussion in 'Business & Economics' started by sculptor, Dec 4, 2018.

  1. sculptor Valued Senior Member

    I read that most of the DOWs gains over the last 65 years was due to inflation.

    Is this accurate?
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  3. origin In a democracy you deserve the leaders you elect. Valued Senior Member

    I wouldn't say that is true. If you look at just 65 years then the gains in the Dow match inflation almost perfectly. However, if you look at the gains in the last 36 years the Dow has done much better than inflation. If you look at the last 52 years the Dow has done way worse than inflation. It all depends on your starting point. It sounds like someone picked a very specific time (65 years) to make a point.
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  5. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

    Okay, in 1953 the Dow peaked at just under 300.
    It's now c.24,500 - a small gain in 65 years of 8167%
    Consumer Price Index (CPI), taking 1983 average as 100, was around 26.8 in 1953 and is now c.253, a gain of nearly 1,000%.
    So in real terms the Dow seems to have grown about 8 times faster than inflation.

    How does this stack up against what the OP read?

    Also, you have to bear in mind that the Dow does not take into consideration the dividends that those companies pay. If the yield averaged c.3% a year then this alone mostly covers inflation, even before any movement in the index itself.
    If you had then reinvested those dividends over the 65 years back into the index then your returns would have been significantly higher.


    One website I've seen that calculates all this suggests that since Dec 1953 the Dow has grown 8,801.7% (so broadly ties in to what I estimated above).
    A CPI adjusted growth is 853%, so again broadly in line, suggesting DOW has outstripped inflation 10-fold over the past 65 years.

    If you had reinvested dividends, the growth would have been 85,000% (9,000% if adjusted for inflation) so ten times higher than without.

    So I disagree about the DOW having only grown by inflation over the past 65 years.

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