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®