| Year End |
Buy & Hold $10,000 Becomes: |
Dow |
|---|---|---|
| 1953 |
$10,000 |
280.90 |
| 1954 |
$15,063 |
404.39 |
| 1955 |
$18,932 |
488.40 |
| 1956 |
$20,218 |
499.47 |
| 1957 |
$18,473 |
435.69 |
| 1958 |
$25,755 |
583.65 |
| 1959 |
$30,877 |
679.36 |
| 1960 |
$28,944 |
615.89 |
| 1961 |
$35,377 |
731.14 |
| 1962 |
$32,714 |
652.10 |
| 1963 |
$39,493 |
762.95 |
| 1964 |
$46,693 |
874.13 |
| 1965 |
$53,446 |
969.26 |
| 1966 |
$44,852 |
785.69 |
| 1967 |
$53,435 |
905.11 |
| 1968 |
$57,540 |
943.75 |
| 1969 |
$50,681 |
800.36 |
| 1970 |
$55,358 |
838.92 |
| 1971 |
$60,789 |
890.20 |
| 1972 |
$71,849 |
1020.02 |
| 1973 |
$62,174 |
850.86 |
| 1974 |
$47,328 |
616.24 |
| 1975 |
$68,439 |
852.41 |
| 1976 |
$83,704 |
1004.65 |
| 1977 |
$72,686 |
831.17 |
| 1978 |
$74,253 |
805.01 |
| 1979 |
$81,728 |
838.74 |
| 1980 |
$99,286 |
963.99 |
| 1981 |
$95,417 |
875.00 |
| 1982 |
$121,308 |
1046.54 |
| 1983 |
$152,483 |
1258.64 |
| 1984 |
$153,642 |
1211.57 |
| 1985 |
$204,640 |
1546.67 |
| 1986 |
$259,679 |
1895.95 |
| 1987 |
$273,638 |
1938.83 |
| 1988 |
$316,924 |
2168.57 |
| 1989 |
$416,325 |
2753.20 |
| 1990 |
$414,131 |
2633.66 |
| 1991 |
$513,962 |
3168.83 |
| 1992 |
$551,051 |
3301.11 |
| 1993 |
$644,305 |
3754.09 |
| 1994 |
$675,239 |
3834.44 |
| 1995 |
$922,357 |
5117.12 |
| 1996 |
$1,186,548 |
6448.27 |
| 1997 |
$1,479,576 |
7908.25 |
| 1998 |
$1,746,364 |
9181.43 |
| 1999 |
$2,220,255 |
11,497.12 |
| 2000 |
$2,114,410 |
10,786.85 |
| 2001 |
$1,999,156 |
10,021.50 |
| 2002 |
$1,698,552 |
8,341.63 |
| 2003 |
$2,173,601 |
10,453.92 |
| 2004 |
$2,289,089 |
10,783.01 |
| 2005 |
$2,322,749 |
10,717.50 |
| 2006 |
$2,758,751 |
12,463.15 |
| 2007 |
$2,996,622 |
13,264.82 |
| 2008 |
$2,038,802 |
8,776.39 |
| 2009 |
$2,496,456 |
10,428.05 |
| NOTE: This is a 10.36% compound annual increase since 12/31/53 (56 years). | ||
WALL STREET NOT a One-Way Street -
"Stocks tend to fluctuate", so said J.P. Morgan in one of history's great understatements. One look at the History of the Stock Market in the 20th Century (which follows) confirms this. The stock market goes up (a Bull Market) and down (a Bear Market), but beyond that, Wall Street, quite unbelievably, has no universally accepted definition of either, so here goes:BULL Market: Charles Dow (of Dow-Jones The Wall Street Journal and The Dow Theory fame) defined it as "a broad upward movement" - I'd say O.K. but a little vague. Ned Davis Research defines it as "a 30% gain after 50 days, or a 13% rise after 155 days" - now I'd say that's not too vague, but is a little too much. My own studies of the stock market in the 20th century show many fluctuations of 10 or 15% that don't develop into anything, but when markets bounce up 19% that is the threshold from which advances have then risen 95% of the time to over +29%. One-half have risen over 80%, with the average Bull market gain being +115%, and lasting nearly 3 years (based on the record with the aberrations of the 1930's removed). Therefore, I define a Bull market as one which advances 19% on both the Dow Jones Industrial Average and the Standard & Poor's 500 over any timeframe. Economic expansion has followed each such occasion. Subscribers will find a full report plus graph in the Special Report: Bull Markets of the 20th-21st Century.
BEAR Markets follow (and precede) Bull markets. The market has declined over 10% more than 50 times in the 20th century, yet that alone has not resulted in Bear markets. The threshold of -16% has resulted nearly 82% of the time in declines occurring of at least -21%. Nearly one-half (10 of 22) have dropped over 35% with the average loss for Bear markets being -34% over a year and a half's time. Therefore, I define a Bear market as one which declines 16% on both the Dow Jones and the S.& P. 500 over any time-frame. This definition is followed 77% of the time by recessions. It happens that a 16% decline is the reciprocal of a 19% advance, and vice versa. A market decline from 10000 to 8400 (-16%) would be a Bear market, and conversely a market advance from 8400 to 10000 (+19%) would be defined as a Bull market. Subscribers will find a full report plus graph in the Special Report: Bear Markets of the 20th-21st Century.
How does it matter? Usually Bull markets occur for 67% of the time and Bear markets exist for some 33% of the time. When Bear markets come (and they always do) they have been followed 77% of the time by recessions. (see "The Stock Market as a Business Cycle Predictor in the 20th Century" which follows). Some Bear markets take years to regain their losses, for instance it took 25 years after 1929 to get back to those highs. After the market first hit 995 on the Dow Jones Average in 1966, it was still at that level 16 years later in 1982. And then came the 17 1/2 years from 1982 to the year 2000 with a 15 fold increase that had newer investors thinking it was always like that. The market ALWAYS does one of three things: it can go UP, DOWN, or SIDEWAYS. But it NEVER goes just one-way forever!
Buy & Hold results from 1953-1997 were calculated by Hulbert Financial Digest using the Dow Jones Industrial Average with dividends reinvested yearly. Those results are virtually identical to the results shown here which have been calculated with dividends invested quarterly on the average account value for the period. My thanks to Tom Halgren, a subscriber with a computer capability that escapes me, for calculating these results. He and I believe this/his calculation is as true and correct as is possible to construct.
ÞThe BOTTOM LINE: Despite Wall Street being a two-way street, still, most investors should simply Buy and Hold stocks for the long-term. The results to the left show how $10,000 would have grown to nearly $3,000,000 by buying and holding over the last 56 years up until 1008. It then shows a drop of nearly $1,000,000 in just the one year of 2008! This is the benchmark against which the results of timing the market should be compared. You will see our interpretation of The 'original' Dow Theory, the Schannep Timing Indicator, and finally, the Composite Timing Indicator, all of which beat Buy and Hold' benchmark handily!
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