The Dow You Thought You Knew

(Via CJR)

Here's a great parallax:

That's the Dow Jones Average adjusted for inflation.

Audit Reader Edwin Hamilton also notes that the Dow has performed miserably over long investment horizons. He calculates that a dollar invested in the stock market in January of 1966 was worth—you guessed it—a dollar in real terms in September of 1995. Worse, that dollar invested in 1966 was worth only about 33 cents in real terms if you happened to cash out in October 1982, just before the great bull market began.

Of course, that (like the WSJ’s 1929 to 2009 number) is measuring from a peak to a trough, which isn’t exactly fair. But even if you measure from the very nadir of the Depression-era Dow, which hit 651 in 1932 (in 2009 dollars. The nominal number was 41.22), you still end up with a real annual return of just 3.7 percent over the last seventy-seven years. You’re not going to get rich on those kind of returns.

Yow.