What am I talking about? I'm talking about what the average long term investor in the stock market has earned on average per year since the 1890s. Why don't more people know about this? I would say that most people who write now days are connected to someone who makes money on the number of trades you make on the stock market. That is my thought on this. Because if you just invest your money and start earning dividends and your stocks go up you mostly are the only one benefitting directly from this and also the company you are investing in has the money to do more business worldwide.
Let me give you one example. If you invested $50,000 in the 1950s in General Electric that stock if left in place would have been worth around $3,000,000 dollars around the year 2000 which is much more than doubling your money every decade. Let's see what doubling per decade including dividends would bring? By the 1960s it would be $100,000. By the 1970s it would be $200,000. By the 1980s it would be $400,000. by the 1990s it would be $800,000. By the 2000s it would be $1,600,000. So, in this case GE was almost double the average. So, this is something to think about. Also, you only pay capital gains tax when you sell your stock but you have to pay capital gains tax on Dividends each year they are paid to you.
Understanding the average since the 1890s doesn't mean that is true also now. It could be more or less per decade ongoing from here. So, it is still a risky business. However, if you think the rules from the 1890s until now are still in place then there are still good long term investments to be made as long as you diversify your investments throughout Blue Chip dividend bearing Stocks to limit risk.
Look at the last 5 years for example. Stocks have dropped as low as around 7000 and have gone as high as 13,000. However, if you invested at around 7000 and rode the market up, right now you have almost doubled your money and that is without allowing for any dividends.
Getting ahead in life usually hasn't come from working for wages in a 40 hour week. Getting ahead financially at least usually has come from buying houses or other real estate and investing in the stock market or in various other savings instruments. This also is something to think about when you plan your long term strategy for yourself and you family.
However, if you are buying a house or land as an investment rather than just because you like it there just remember that it is always and always has been Location Location Location.
As a young person my wife and I once bought 2 1/2 acres for only 8000 dollars because it was beautiful there but didn't have electricity or phones in that remote area. We never regretted buying that land or building a house because it saved us at least 60,000 dollars in the 5 years we lived there from 1980 to 1985 in rent. We were much happier than renting anywhere. We lived a wilderness lifestyle and home schooled our kids. So, was it a good investment? Not financially. But in the money it saved and in our increased health and happiness and in being able to home school our kids and spend time with them in the wilderness it was priceless. To us it was worth more than millions of dollars in the actual health and value into our lives that it brought.
So, it is also important sometimes to think about the quality of your lives and at other times think about things only from a financial investment point of view. Both are important at different times in your life in being able to better care for yourselves and your families.
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