A First In The Stock Market

Ryan has one of the more interesting questions for Dave regarding the stock market.

QUESTION: Ryan compares the stock market final balance today with the same date 10 years ago and asks if this is the first 10-year period in the stock market’s history that hasn’t made money. Dave thinks this is a very interesting question.

ANSWER: I don’t think so, but I’d have to go back and look. I don’t think that’s based on what the Dow has done. I think the statement of “over a 10-year period” is whether the Dow has made money. It would have made a ton of money in the interim, but now it’s back to where it was. Does that mean your money has compounded through that time and now it’s back to that? No it doesn’t.

If you had been investing from October 1998 to October 2008, you would have still made money and been up. The reason is that you would have received dividends and compound interest during that time. The Dow is not the measure of that. If you put $10,000 into a mutual fund 10 years ago, would it be worth $10,000 now? The answer is no. It would be worth more than that.

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