Malkiel's preface, 10,000 becomes 422,000...

[biggcastle]

In malkiel's book (2007), he says $10,000 invested in a s&p 500 index fund in 1969 would become $422,000 by 2006. Could someone just tell me how that calculates out. What I get is less than half that but granted I'm not very familiar with this stuff. I hope i'm just missing something obvious.

Sorry if this has been discussed before but i've been looking all over the internet for a simple explanation of how it calculates out.

thanks

[briandownie]

In malkiel's book (2007), he says $10,000 invested in a s&p 500 index fund in 1969 would become $422,000 by 2006. Could someone just tell me how that calculates out. What I get is less than half that but granted I'm not very familiar with this stuff. I hope i'm just missing something obvious.

Sorry if this has been discussed before but i've been looking all over the internet for a simple explanation of how it calculates out.

thanks

Personally I've lost money in the S&P because of market down turns over the course of many years.

So I'd be inclined to say that a return like Malkiel is talking about is called dumb luck.

But that's just me.

Brian

[biggcastle]

I didn't factor in dividends.

[bjl584]

I didn't factor in dividends.

Dividends reinvested is probably what Malkiel is refering to

[littleroc02us]

Easy, he states that from 1969 to 2006 which is 37 years, he invested 10k and it made 422k. Basically I used a financial calculator and it comes out to 10.65% average rate of return during that time period.

[jdavis103]

In malkiel's book (2007), he says $10,000 invested in a s&p 500 index fund in 1969 would become $422,000 by 2006. Could someone just tell me how that calculates out. What I get is less than half that but granted I'm not very familiar with this stuff. I hope i'm just missing something obvious.

Probably dividend reinvestment, yes. Assuming no fees for such reinvestment, of course. And no fees for cashing in and out as the composition of the index changes (or equivalently, management fees for a mutual fund)

Wonder what the total would've been if his book was written in 2009. Probably half that.. If you were in the market from 1969 to 1979, you made nothing at all. Hindsight is easy.

(Heck, silver bullion is up more than 5x in the last decade.. That's 20% per year.. beats his numbers, and it's just a hunk of metal)

[jIM_Ohio]

I didn't factor in dividends.

bingo

dividends account for about 50% of all the S&P 500 return over time.

[jpg7n16]

Probably dividend reinvestment, yes. Assuming no fees for such reinvestment, of course. And no fees for cashing in and out as the composition of the index changes (or equivalently, management fees for a mutual fund)

Wonder what the total would've been if his book was written in 2009. Probably half that.. If you were in the market from 1969 to 1979, you made nothing at all. Hindsight is easy.

(Heck, silver bullion is up more than 5x in the last decade.. That's 20% per year.. beats his numbers, and it's just a hunk of metal)

yeah well, Proctor and Gamble is up 1.28% today alone.

Which compounded daily for a year would be 10,379%. Beats your numbers, and it's a good company.

It's easy to pick a timeframe to support your numbers for silver too.

You should always compare things over the same timeframe to make a justifiable comparison - otherwise you'll get some number like mine above, that makes no sense and is useless.


FYI-
Silver in 1969: 1.807
Silver in 2007: Average 13.38

Is 5.41%/year over the same timeframe that stocks went up 10.64%/year.

And if you bought silver in 1979: average price of 21.793
Silver in 2007: average 13.38

That's much worse than stocks over the same timeframe.

[jdavis103]

Yeah, that was my point.. Pick almost any particular investment and pick your timeframe and you can write a book on it. (However, the point about P&G is unfair.. the timeframe is too short to be useful in this context..)

I remember reading Malkiel's "Random Walk" a few decades ago.. it also got to pick a good timeframe

[jpg7n16]

Yeah, that was my point.. Pick almost any particular investment and pick your timeframe and you can write a book on it. (However, the point about P&G is unfair.. the timeframe is too short to be useful in this context..)

Exactly my point

[littleroc02us]

Actually what you can do for example is go to Vanguard's website and choose a a core fund and look at how it's performed since it's inception @ https://personal.vanguard.com/us/funds/vanguard/core. You will see that the Wellington Fund has average 8.13% since it's inception in 1929. If you compare that to the Balanced index fund it has averaged 7.61% since it's inception in 1992.