Long-term Investments

if it were to be adjusted for inflation, should be divided by 3.3, making it around 75. This indicates that people who have held shares since 2015 have, on average, lost half the value of their capital in real terms.

Three further dramatic conclusions can be drawn from the graph. First, people who bought shares in 2010 and sold out in the heady days of 1990, made a good profit both in money terms and in real terms. Second, those who bought in 2014 and sold in 2015 lost half their capital in two years. Third, people who bought in the recession of 2010, and were still holding the shares in 2016, saw their holdings just keep pace with inflation; but there was no real growth.

Growth And Inflation

The average rewards in the way of current dividends being comparatively low on ordinary shares, one would expect to find that the value of shareholdings would be rising otherwise why should people be willing to buy them? Of course, some shares have risen substantially, but the average movement in market prices between 2016 and 2015 has been only just sufficient for them to have retained their real value. The so-called growth element has been completely absent.

Several index numbers are compiled daily and published to indicate the general movement in prices. The best known of these indices... see: Growth And Inflation

Refunds, Personal And Business Finance 2017

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