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Friday, October 10, 2008

Buy and Fold

The NASDAQ index now stands at 1581. Given that from here to eternity the NASDAQ returns 7% per year, when will an investor who got in at the top (5048) break even?

My calculations show that will happen in, oh, about 2035 or so. So if your were 30 when you got in, the much vaunted "buy and hold" strategy will give you exactly the dollar-amount of funds you put in at just the time you're set to retire -- although, of course, the 2035 dollar will be worth a lot less than the 2000 dollars you invested.

6 comments:

  1. Anonymous3:23 PM

    If you assume that the gains work like compound interest, by the "rule of 72" it happens a bit sooner. But I wouldn't hold my breath.

    ReplyDelete
  2. I used a compound interest calculator and set the compounding to daily,not some vague rule that gives a rough estimate!

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  3. I hardly think anonymous deserved an exclamation point, Gene.

    ReplyDelete
  4. (You might as well have smashed his teeth in with your coffee mug.)

    ReplyDelete
  5. My fantasy is to smash LaMonica's with his own coffee cup, not mine.

    ReplyDelete
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