Readers Write: Buying stocks for long term a wise move


Over the years  i have often heard that on the average the  stock market  rises about 10 percent per year.
The implication is that were you to “buy and hold”  Dow Jones Industrial-type stocks over a long period of time  that you could pretty much  count on your portfolio  rising, on  average, 10 percent per year.  
Does past history bear this out?
Curiosity finally got the best of me so i recorded the  year end closing DJIA for the past  30 years  to study this.    
From 1986 to 2007 the 21 years ending just before the serious recession of 2008 the DJIA  did indeed rise at the rate of just a hair under 10 percent per year.  
But what  would have happened to your portfolio had you not cashed in 2007 but held on until 2015.  
Then the annual  Dow Jones  increase for the entire 29- year period  would have been a bit under 8 percent. Still not bad, especially having  weathered  the worst recession since the  stock market crash of 1929.
Suppose you had invested $10,000  30 years ago.  
It would have been worth $74,000 by 2007, just before the recession.  
On the other hand had you held on through the recession until 2015 your portfolio would  have  been worth  $92,000.
It is interesting how little this severe recession would  have affected your long-term investment.
Of course inflation reduces the actual purchase power of the results but on the other hand  you would  also have received  considerable dividends during this period.
Theodore Theodorsen


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