Is the Stock Market a Positive-Sum Game or a Ponzi Scheme?

[Vanadium 50]

What I can tell you is that never in its history has the US stock market had a 15 year period where a highly diversified group of stocks didn't turn a profit. Not even if you bought a bunch of stocks the day before the 1929 stock market crash.

This obviously must rely on dividends as well as capital gains. Since you have the data, can you check this for the 15-year period ending with the Dow's low of 41.22 in min-1932?

What I find surprising is that this discussion is focused almost entirely on capital gains. Dividends are very important. If I were to buy shares in, say, Coca-Cola, I would get 2.75% of my money in dividends. Even if I believed that the price of KO would be constant over time, this would be a good investment.

 

[russ_watters]

This obviously must rely on dividends as well as capital gains.

Yes.

Since you have the data, can you check this for the 15-year period ending with the Dow's low of 41.22 in min-1932?

Unfortunately, that's a paraphrase from a book. It doesn't have the actual numbers.

What I find surprising is that this discussion is focused almost entirely on capital gains. Dividends are very important. If I were to buy shares in, say, Coca-Cola, I would get 2.75% of my money in dividends. Even if I believed that the price of KO would be constant over time, this would be a good investment.

Meh - it was just a specific question.

 

[mheslep]

Here's a 15 year window on google finance for the DJI (no dividends) going back to '73. No losses for a 15 year window ever occur, though regrettably the lowest 15 year returns are recent. This past Summer-Fall had 15 year returns of 60-80%, lower even than placing the window close on the bottom of the crash in March 2009.

 

[Tosh5457]

Here's a 15 year window on google finance for the DJI (no dividends) going back to '73. No losses for a 15 year window ever occur, though regrettably the lowest 15 year returns are recent. This past Summer-Fall had 15 year returns of 60-80%, lower even than placing the window close on the bottom of the crash in March 2009.

That doesn't prove anything, as I said over and over, the stock market being a zero-sum game, excluding dividends, doesn't imply that stocks can't grow in the long term. I could also show a graph of any commodity future that grew for a long time, it doesn't make speculating in commodities futures a non zero-sum game. Somehow I get the impression many people are confounding zero-sum game with a game which in nobody can win.

 

[russ_watters]

Tosh, if you read the last few posts, that's a response to a different question.

 

[mheslep]

... No losses for a 15 year window ever occur, though regrettably the lowest 15 year returns are recent. This past Summer-Fall had 15 year returns of 60-80%, lower even than placing the window close on the bottom of the crash in March 2009.

That is to say, for the market (DJI) to be returning traditional 15 year returns it should be well above 20000 now.