The U.S. stock market has been on another record-busting run recently, and the Dow Jones Industrial Average has set five new highs in the past two weeks. This benchmark, made up of 30 of the largest U.S. companies, is on track for its best year of returns since 2017.
What's more, this year appears poised to cap off one of the best decades ever for investors. Even though there have been some patches of turbulence, the U.S. stock market is in the midst of its longest-ever bull market. And this particular benchmark surpassed 27,000 this year, and is just about 1% below its next even-number threshold: 28,000.
If you had invested $500 in an exchange-traded fund (ETF) that tracks the performance of the Dow Jones average back in November 2009, that would be worth nearly $1,720 as of November 12, 2019, according to calculations by Grow. That works out to a return of more than 240%.
Rather than just calculating the change in price, which would be about 171% in that time period, we've calculated the total return. That assumes you reinvested the dividends — a portion of a company's or fund operator's profit — you earned each quarter, which is an easy way to grow the value of your portfolio.
The Dow is up nearly 19% year-to-date. If 2019 ends up by that much, that would make it the third-best year of returns in the past decade. During that time, this index has seen returns ranging from down 5.6% to up 26.5%, with an annual average of about 10.7%.
These year-to-year fluctuations are the reason why experts recommend you invest in stocks for a minimum of five years. The market is more likely to get bumpy in the short term. Over longer periods of time, however, the market has always turned higher again — which is why it has a proven, long-term track record.
Buying individual stocks can be risky, since they can experience sharp fluctuations. Investing in the broader market, especially if you buy and hold, can be both safer and easier. And if you keep adding money to your portfolio regularly, you'll potentially buy at times when stock prices are lower.
The long-term historical average annualized return for the U.S. stock market is almost 10%, and investing in index funds is a simple but effective approach that's championed by, among others, investing legend Warren Buffett.
The U.S. stock market has been rising pretty steadily since 2009, even with some bumpiness along the way. That's why a buy-and-hold index fund strategy would have paid off over the past 10 years: You could have bought at the decade lows for a Dow ETF and then given yourself time to benefit from the market's rally.
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