Observations:
● The major indexes tend to move in the same direction.
● The NASDAQ has been the best performer if dividends are excluded.
● The S&P 500 has been the best performer if dividends are included.
● The major indexes tend to move in the same direction.
● The NASDAQ has been the best performer if dividends are excluded.
● The S&P 500 has been the best performer if dividends are included.
Log scale source
Analysis (1950 - 2006):
A brief review of the 56 year graph above, reveals that the three indexes tend to move in the same direction
but sometimes at a different rate. (For example, from 2000 through 2002 all indexes declined but the
NASDAQ had the greatest percentage decline.)
Excluding dividends, the NASDAQ outperformed the DJIA by 2.35% per year (9.64% - 7.29% = 2.35%).
However, the average dividend yield for the Dow during that period was 3.9%. The return for the DJIA
including dividends was 11.19% (7.29% + 3.9%).
Excluding dividends, the NASDAQ outperformed the S&P 500 by 1.75% per year (9.64% - 7.89% = 1.75%).
However, the average dividend yield for the S&P 500 during that period was 3.95%. The return for the S&P
500 including dividends was 11.84% (7.89% + 3.95%).
As far as we know, NASDAQ Composite dividend yields for the 1950 - 2006 period are not available. If the
task of tracking dividends on the thousands of typically non dividend paying NASDAQ stocks has been
undertaken, we have not found that the results have been published. Based on what we do know, they have
been minimal. The current yield for the largest 100 NASDAQ stocks (NASDAQ 100) is only . 27%. We do not
believe that NASDAQ dividends have been sufficient to outperform the Dow or the S&P 500 on a total return
basis. (Total return is the sum of price performance and dividend yield.)
A brief review of the 56 year graph above, reveals that the three indexes tend to move in the same direction
but sometimes at a different rate. (For example, from 2000 through 2002 all indexes declined but the
NASDAQ had the greatest percentage decline.)
Excluding dividends, the NASDAQ outperformed the DJIA by 2.35% per year (9.64% - 7.29% = 2.35%).
However, the average dividend yield for the Dow during that period was 3.9%. The return for the DJIA
including dividends was 11.19% (7.29% + 3.9%).
Excluding dividends, the NASDAQ outperformed the S&P 500 by 1.75% per year (9.64% - 7.89% = 1.75%).
However, the average dividend yield for the S&P 500 during that period was 3.95%. The return for the S&P
500 including dividends was 11.84% (7.89% + 3.95%).
As far as we know, NASDAQ Composite dividend yields for the 1950 - 2006 period are not available. If the
task of tracking dividends on the thousands of typically non dividend paying NASDAQ stocks has been
undertaken, we have not found that the results have been published. Based on what we do know, they have
been minimal. The current yield for the largest 100 NASDAQ stocks (NASDAQ 100) is only . 27%. We do not
believe that NASDAQ dividends have been sufficient to outperform the Dow or the S&P 500 on a total return
basis. (Total return is the sum of price performance and dividend yield.)
| How can I use this information? 1) Don't exlclude the Dow from your consideration. Sure, it may seem boring and old fashioned compared to the Nasdaq. It has also provided a smoother ride. We have twice as much historical information regarding the Dow (back to 1896). Also, it is an index that you can actually buy directly. There are only 30 stocks. The composition of the index seldom changes. You can create your own mutual fund with no fund expenses and no management fees. There will be no capital gains taxes unless you sell. |
| More: Look below to send us feedback or to see previous issues of Investment Tips. |
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6/2/06
| Link to Previous Issue of Investment Tips |
| Can This Bull Market Continue? Rising interest rates can really hurt stock returns! Click the above link to see the 90 year record. |
| In the next issue of Investment Tips: Which index had the best 56 year performance, the Dow, S&P 500 or the NASDAQ? SignalTrend will show you the 56 year record. |
| Major Indexes: Same directions... different speeds. Proprietary Graphs, Tables and Analyses - All Rights Reserveds |
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Our Market Timing... Your Triple Gain ! Backtested 100 Years !
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1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
| DJIA, S&P 500 and NASDAQ (1950 - 2006, excluding dividends) |
NASDAQ 9.64% annual return
DJIA 7.29% annual return
S&P 500 7.89% annual return