Dow One Million?

Warren Buffett, speaking at an event to mark the 100th anniversary of Forbes magazine, suggested that the Dow Jones Industrial Average (DJIA) would be “over 1 million” in 100 years.

One million may look like a big number, and it is, but it only assumes a compound average annual return of approximately 4%.  Considering that the S&P 500 average return over the last one hundred years has approximated 10%, perhaps Mr. Buffett is being a bit conservative.  Note that the S&P 500 and the DJIA are not identical.  The DJIA 25 year return has been slightly more than 10%.

Going further, Mr. Buffett said, “being short America has been a loser’s game.  I predict it will continue to be a loser’s game.”

Investors should note that long-term results do not reflect the short-term market swings.  Investors would be well advised to consult with their advisor(s) and develop a strategy that is designed to capitalize on longer term market trends while providing some protection during market fluctuations.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®