To: Clarksterh who wrote (28768 ) 3/3/1999 12:15:00 PM From: Sun Tzu Read Replies (2) | Respond to
Sigh! Here is my last post on this topic. First of all, you did lose 75% to inflation during the 70s and over 80% in you go from 1966 to 1982. I know this from several sources. Check your numbers again. I am not going to argue about the inflation rate since 1982 because I am not as sure of that. I also prefer to use CRB as my proxy for inflation rather than CPI because CPI is open to government interpretation of the "quality" improvement of goods, and that is too subjective for me. Also, last I checked DJIA was below 9300 and falling, so the returns are a factor of 9.3 (and perhaps a lot less by then end of the year <G>) But even taking your inflation rate since 1982, you still get 9.3 x 0.2 (should be 0.15 but I'm being generous here) x 0.57 (your inflation rate) and AT BEST you get 1.06 or a 6% gain in 33 years (excluding dividends). This is the average annual gain of only 0.1%. This is far less than what the public is told and is certainly not worth the risks.in the long run ), then that thing would have ballooned to engulf the universe by now. It has not happend with bonds, gold, oil, real estate, etc. and it will not happen with stocks either. That is just the nature's way of keeping things in check. I repeat, in the long run, no matter what you invest in, you will bread about even. smaller companies tend to have correspondingly higher rates of return on average to 'adjust' for that risk. What works on Wall ST. He did a thorough research of the stock market since the turn of the century. It turns out that that statement applies only to the bottom 10% of the market capitalization (companies that have under 20 million market cap). But in order to make it work, you have to own over 2000 different ones to diversify enough. Beyond that the statement does not hold water.
