Long-Term Investing

To Invest or Not to Invest?

by Phantasmix

To Invest or Not to Invest? That is the question. Here’s an interesting take on it:

  • Real GDP growth in 1929-2002 is 3.331%. (If one were to use this to estimate stock growth, dilution must be subtracted; it is typically within 1% to 3% range.)
  • Real return from DJIA 1913-2002 is 2.738%.
  • Real return from DJIA 1913-1991 is 1.269% (notably, population growth is 1.257%).
  • Real return from HPI 1975-2002 is 0.635%.
  • Real guaranteed return from TIPS (locked in recently for 9 to 30 years): 2.260% to 3.480%.

TIPS currently offers better long-term return than DJIA. In addition, TIPS returns are guaranteed, while stock investment might lead to principal losses even over the long term.

Not sure if there is a Canadian equivalent to the TIPS (Treasury Inflation-Protected Securities). I couldn’t find anything similar at the Canada Savings Bonds site, but I guess anyone can buy U.S. TIPS.

Certainly something to think about if you have no desire to investigate other options and don’t tolerate risk well.