PBS Drops Another Bombshell: #WallStreet Is Gobbling Up Two-Thirds of Your 401(k)

[progree]

29. VFIAX - VANGUARD = member-owned. And Vgd S&P 500 fund has grown 42-fold since 1976 inception

VFIAX = Vanguard S&P 500 Index Fund, Admiral shares ($10,000 minimum investment required) -- 0.05% expense ratio. Wow. Didn't know it was that low. http://www.marketwatch.com/investing/fund/VFIAX

I tend to follow VFINX - Vanguard S&P 500 Index Fund, Investor shares ($3,000 minimum investment required) because of its longevity -- inception 8/31/76.

Per thestreet.com http://www.thestreet.com/quote/VFINX.html

VFINX since inception: 10.75%/year average annualized return (last update 4/26/13 547p ET) inception = 8/31/76.

Unfortunately, it doesn't show the cumulative return, but that's easy enough to calculate:

It is 36.65 years between 8/31/76 and 4/26/13, according to Excel. So...

1.1075^36.65 = 42.19, i.e. a factor of 42.

Meaning, $1,000 put in in 8/31/76 is now worth $42,190 now, i.e. a 42-fold increase plus change.

Now this is all after expenses. This is not an investment in a theoretical index. This is not Wall Street's take. It is an investment in a real-world fund. It is what Joe six-pack would have gotten for his $1,000 investment on 8/31/76.

It is also not cherry-picking some best-performing fund, although, no doubt it is one of the best because of its low expense ratio and that index funds outperform just about any actively managed fund over the long haul. Similar results would be found if one invested in a growth index fund. Or a value index fund. Or a small cap index fund. Or a mid-cap index fund. Or another large-cap index fund. Or even an international index fund. Unfortunately few (if any?) index funds go back that far. Its not like the S&P 500 has outrun all other sectors of the market.

There was the famous Peter Lynch / Fidelity ad that I remember seeing. Well I googled this and found this from 2001:

http://www.rbcpa.com/peterlynchcommentary20010920.pdf

Since World War II, despite nine recessions and many other economic setbacks, corporate earnings are up 63 fold and the stock market is up 71 fold. Corporate profits per share have grown over 9% annually despite the down years. Nine percent may not sound like a lot but consider that it means that profits mathematically double every 8 years, quadruple every 16, are up 16 fold every 32 years, and are up 64 fold every 48 years."

I just can't understand how some DU types can complain about how corporate profits are an ever-bigger share of the economy (while wages/salaries are an ever-declining share). And how profitable the corporations are blah blah blah. And then in another post they will say I'm way too smart to invest in the stock market.

Well, the stock market is investments in corporations, and earnings (profits) drive share prices and provide dividends.