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
Manhasset
Readers Write: Buying stocks for long term a wise move
