The S&P 500 and Dow both achieved 5 year highs! This has been on all of the news networks and it sounds really good – is it? Let’s take a look at this 5 year chart from CNN.
The Dow is now back to where it was 5 years ago. So if you put in $10,000 5 years ago you would now (after 5 years off being underwater) finally have a little bit more than the $10,000 you started with.
But wait… did you notice? That chart is longer than 5 years…. It includes part of 2007 all of 08, 09, 10,11,12, and about 6 weeks of 2013. It is almost 5.5 years. Yes it matters! Markets go up and down so, the date you pick to start and end your data can give very different results. Let me show you.
This next chart is from Yahoo Finance. I like this because you can pick any rage you want. Here is the Dow again – actual 5 years.
It is too small to read but 5 years ago the DOW was at 12,381.02 and now it is 14.035.67. This is a 5 year increase of 13.36% (~2.5% per year). Not fantastic but way better than the CNN chart would have you believe over 5 years. Not I will start from that nasty little low spot in early 2009.
In this case the Dow went from 6,627 (yes 6 thousand) to 14,035.67. In 4 years the DOW is up 111.80%. (~21%per year). So one could easily pick a chart that shows you would have made almost nothing in 5 (5.5 years) or over 110% in less than 4 years. The amazing thing is …. They are all correct.