Friday, October 05, 2007

Is the Stock Market a Good Investment?

The market closed over 14,000 today. If you had invested in the market about 5 years ago, you would have earned a compound annual rate of return of 10.75%. The market was at 8,397 about 5 years ago and 14,000 is about 66.67% higher than 8,397. If you raise 1.1075 to the 5th power, you get about 1.667. Below are the rates of return if you go back 5, 10, 15, 20, and 25 years.

5-0.1075
10-0.0654
15-0.1028
20-0.1023
25-0.1117

But we are at high point this year. We are up about 10% in just about 9 months. So what if we had started from the beginning of the year? Below are the returns.

5-0.0494
10-0.0635
15-0.0953
20-0.0923
25-0.1128

1 comment:

carl said...

This is proof that saving and investing at a young age and then sitting back and watching it grow is a great idea!!!