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Tuesday, October 2, 2012

Historic returns

In the stock market as in baseball, is all about odds, below are the numbers...

You make your own decisions,


*I annualized daily returns using 250 trading days

Let's begin with the Dow Jones... by 2012, we had over 100 years of daily observations, close to 30,000 trading days. Two massive global recessions and countless cycles of boom and bust.
The breakdown?

15,208 days the market went up, compared to 13,938 losing days. This means that winnings days are 52.18 percent of the sample.  On average you should expect to make 0.027% per day... It is important to note that on average a negative return is higher than a positive return. You make up the difference because of the extra wining days.



Monthly returns offer a similar picture... there are more positive months than negative ones.. same for years. Interestingly the "winner" percentage goes up as the average return

The DJ is a very narrow index, and not indicative of a diversified portfolio... The next picture is the S&P 500, 1950 to present



Same patterns...

Our parents and grandparents could only dream on international diversification the way we have it now... What do you think would happen with the world in your basket?

Here it goes (dates vary from roughly 10 - 25 years)



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