DJIA Historical Performance Of The Dow Jones

With the recent volatility creating instability in portfolios and peace of mind of people, take a look at how the DJIA (Dow Jones Industrial Average) achieved during the last 30 years or most since 1975. Meanwhile, the DJIA has ranged from a high yield of 38% in 1975 (17%) loss in 1977. 1975 to 2006, there were 23 positive and negative 9 years. If you were to do a simple average of annual returns over that period of time, you come up with an average yield of 10.83%

This means that you will earn an annual return of 10.83% by investing in the Dow Jones? Some years you will win this or more, while others earn less to lose money. What is your overall performance is not as simple as taking an average. Let me give an example: Two people are investing their money in different financial instruments over 5 years. The first investor earns a fixed rate of 8% per year, while the second investor earns 15% (-3%), 18% (-12%), and 22% within five years.

 
Investors: 1

Initial Investment $ 10,000.00

After Year One 8% gain $ 10,800.00

After two years 8% gain $ 11,664.00

After three years of 8% gain $ 12,597.12

After four years of 8% gain $ 13,604.89

After five years of 8% gain $ 14,693.28

Investor 2:

Initial Investment $ 10,000.00

After one year 15% gain of US $ 11,500.00

After two years (-3%) Loss of $ 11,583.35

After five years 22% of US $ 14,131.69 Gain

As you can see, an investor earned nearly US $ 562,00 more even calculated the same simple annual average. However, real yields, the first investor gained more than 5.5% over the five year investment. This example to show the value of minimizing the negative returns.