Head Cold And Stiff Neck

Shares, deposits, bonds, what is most profitable? (5)

Similarly, a negative for bonds and the shares fall analogous comparison of rates of return on the investment share. As calculated by Richard Koch in his excellent book, Fri Art of action selection (Warsaw 2006, p. 3) 100 pounds invested in 1950 in building society deposit in 1992 przemieniłoby in an amount equal to the number of 813 pounds, while the same money invested in the stock market in 1914 zamieniłyby 198 pounds. Thus, stock market, in this case would give up 17-fold higher profits than investment banking.

situation is no different in the U.S. market. Assume at the outset that the average Annual interest rates on deposits in the U.S. was in the entire period of the exchange rate equal to the long-term Treasury bills, which amounts to about 5% (for convenience, rounded to the nearest number of accepting equal to 5%).

Now compare: what gives the market rate of return based on the DJIA index in 1932? It is easy to count - about 7.4% 41 x (1 + 0.074) ^ 77 gives 9963, which is roughly the current level of DJIA (at the time of this writing the DJIA is up about 10 430 points but to get round Results accept a slightly lower level of the index). Deposits here are so beaten by the market as much as 2.4% on average. It is worth noting that at present the market is at levels of slump and had to rely on the example of the bull market peak in 2007 the rate of return would be even higher - 8.16%: 41 x (1 + 0.081) ^ 75 = 14115, which may be similar to the levels DJIA top bull in 2007 (its all time peak was 14 198 as of October 12, 2007).

market as a whole also shows a higher rate of return than an investment. Consider the level of the S & P500 from 1961 - 53.32 pts. From that time until today the market is achieved average annual rate of return of 6.5%. It is easy to check: 53.32 x (1 + .065) ^ 48 = 1095th 1095 is roughly the current level of spot this index. Counting the peaks of the bull market in 2007 on the S & P500 (1576 October 12, 2007), we have an even greater rate of return: 8%. It is easy to check: 3.32 x (1 + 0.08) ^ 46 = 1585 (ie plus or minus peak).

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