Market Madness

The Dow has pushed past previous "records" to hit new all time highs. Don't be fooled by these numbers. They do not reflect reality.

Never mind that the previous record was in January 2000 dollars. Inflation eaten up 15% (or more, unless you actually believe the government inflation numbers).

Never mind that the US dollar is worth 30% less in the world now than in 2000.

The fact of the matter is that the market index is reported in "nominal" dollars. It doesn't take into account the lower purchasing power of dollars today as compared to seven years ago.

If you had left your money in cash from 2000 to today, you would be up almost 21%.

Even accounting for dividends paid by Dow companies, this investment is barely break even for 7 years.

Since many ordinary investors buy the Dow through mutual funds, they are getting additional fees removed from their holdings, year after year after year. Over the 7 years, mutual fund fees of 1.5% would have removed another 10% from your nest egg.