Stock Market Returns

November 23, 1998

Monday's close: Dow 9374, S&P500 1188, NASDAQ 1977
November 15     Dow 8919, S&P500 1125, NASDAQ 1847
July peak:      Dow 9337, S&P500 1186, NASDAQ 2014

The Dow today smashed through the July closing peak of 9337 to close at
a new all-time record high of 9374.  Beyond all doubt, the bull market
lives - and the recent unpleasantness was just a secondary decline in
the continuing long-lived bull market.  The S&P500 made a new high also,
but curiously the NASDAQ lags its July peak.

At a time like this, it's interesting to consider what kind of return
one can expect long-term from investing in the stock market.  If you
believe in asset allocation, as I do, then part of your portfolio will
be in bonds, too.  One kind of mutual fund exists which invests in a
mixture of stocks and bonds - the so-called "balanced" fund.  One of
these, now part of the Vanguard family, is the Wellington Fund.  It
was founded July 1, 1929 (ouch - talk about your bad timing!).  Over
these nearly 70 years, it has returned an average compounded rate of
8.41% to its holders.  Check out the Vanguard web site at www.vanguard.com
for all the details.

During this same period, the Consumer Price Index (from the Bureau of
Labor Statistics) has risen from 17.3 to 163.6, which works out to a 3.31%
annual average rate of inflation.  Subtracting this from the average return
of the Wellington fund leaves 5.1% average return net of inflation over
this 69 year period.  At 5.1% compound interest, the value doubles in about
15 years.

Richard Gillmann (richard@nwfolk.com)
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