The Dow Over 100 Years

When people talk about investing, they like to talk about interest rates. One of the most prominent stock market indexes to follow is the Dow. And since the Dow Jones is price-weighted, the points that it measures can look very impressive. However, how do you interpret the Dow as a rate?

Dow over 100 years

How Do I Tell About the Dow in 100 Years?

In the year 1900, the Dow Jones Industrial Average was 65.29. One hundred years later, it was 11,600. Using a Rate Calculator from Truth Concepts, we can see that 65.29 growing to 11,600 over 100 years is 5.32%. So, the Dow has averaged 5.32% over those 100 years.

Now, we know that average does not always properly convey the actual—for example, if you save $100 one year, and $0 the next year, your average is 50%. However, this 5.32% average puts this 11,600 figure into perspective. While it's a huge jump from 65, it's not so large when you look at it over 100 years.

What Will the Next 100 Years Look Like?

While we don't have a crystal ball, we can use what we know now to make a prediction about the future. If the Dow Jones continued to average 5.32% for 100 years, what would that look like?

This time, we'll use a Future Value Calculator, put 11,600 in as the Present Value and the 5.32% for the Annual Interest Rate. When we do this, we can see the Dow will have to be at 2,067,964 in the year 2100 to have averaged a 5.32% annual interest rate during the next 100 years.

 A Snapshot in Time

For fun, let's see where the Dow Jones is at now. Currently, in 2023, the Dow Jones is sitting at a high of 36,154. If we plug that into a Rate Calculator, we get 5.07%. So the average from the year 2000 to 2023 is not that far off from our original 100-year average.

While the Dow numbers continue to climb, this serves as a reminder that with a long-term lens, the Dow Jones is not really averaging 12% like some may say. If it is, this is a short-term view.

It's important to be thinking about the long-term in your finances. This isn't to say that 5% is bad—however, there's more to be said about time and consistency when it comes to the growth of your money.

To learn more about money and how to illustrate financial concepts, join us for a Truth Training. You'll learn how to use every single Truth Concepts calculator with confidence so that you can apply critical thought to your client's financials.

The best way to understand complex topics is through narratives.

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