Saturday, February 11, 2017

Should you trust the stock market? Pt I

Should you trust the stock market? Part I

Historically, the returns have been good on the Dow Jones or the S&P 500. But, as every financial advisor cautions, past performance is no guarantee of future results.

Dow Jones (all-time, also note the log scale—this graph has a much steeper incline than it appears at first glance; see below):
A historical graph. From its record low of under 35 in the late 1890s to a high reached above 14,000 in mid-2011, the Dow rises periodically through the decades with corrections along the way eventually settling in the mid-10,000 range within the last 10 years.

Dow Jones (all-time, labeled with some historical highlights):

S&P 500 (since 1950, including adjustment for inflation):

Or, for those who would prefer an annualized chart of S&P 500 returns, here you go (all-time--note that the S&P 500 was called the "Composite Index" before 1957):

Notably, John Bogle (the founder of The Vanguard Group, an investing company) is not optimistic in the short-term:

So, should you be optimistic? Is it wise to invest in the stock market? Is the market really trustworthy?

You don't need my advice. Take a look at the graphs above and decide for yourself.