By Kris Sayce, editor, Casey Daily Dispatch
In 1998, David Elias published Dow 40,000: Strategies for Profiting from the Greatest Bull Market in History.
The Dow closed that year at 9,181 points.
By March 2003, the Dow had fallen as low as 7,524.
The prospect of getting to 40,000 seemed a long way off.
For that reason, people saw books like Dow 40,000 as a sign of (to use former Federal Reserve Chairman, Dr. Alan Greenspan’s phrase) an irrationally exuberant market.
Yet, Elias had simply relied on history for his prediction.
Because as it turns out, 23 years later, Elias wasn’t far from the mark at all…
And his big prediction can give us an important lesson on how to invest to maximize gains…
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our cast of in-house investing experts, Dave Forest and John Pangere. And from the founder of our business, Doug Casey.
Today, we look at how seemingly outrageous forecasts often turn out to be not-so-outrageous after all.
Small Differences Lead to Big Returns
At the time, Elias’ forecast likely seemed both “out there” and “realistic.”
To those caught up in the dot-com boom, a four-fold increase in stocks was a sure-fire bet… and it wouldn’t take long, either.
To the skeptics and the bears, it was more evidence that investors were heading for trouble.
And yet, the book merely pointed out that if stocks achieved the historical annual average growth rate of around 8.5%, the Dow Jones Industrial Average would hit 40,000 by 2016.
In that context, not such a crazy idea.
Of course, the Dow didn’t hit that level by 2016. And now, in 2021, it still hasn’t hit that level (it’s around 35,946 at writing).
But give it another year and a return of around 11%… and the Dow will hit that mark. So, what’s an extra five years added to Elias’ prediction?
And 11% isn’t so crazy when you consider the market is up 31% in the past two years… even with the COVID-19 crash.
The point is that time and again, investors struggle to cope with forecasting future returns.
For that reason, the idea of turning relatively small amounts into much larger amounts can seem unrealistic… But it isn’t.
Take a starting portfolio of $100,000. Invest that amount at an annual rate of 11%, and over 10 years, it turns into nearly $284,000.
Not a bad return.
But what if you could increase that annual return? What if you could make 15%?
Your same starting pot turns into over $400,000…
And at 20% per year, your same starting pot turns into over $600,000…
In other words, a seemingly small increase to your annual returns can have a big impact.
Helping You Make Bigger and Quicker Returns
This is what our Casey Research investment experts aim to help you do. By increasing your returns, you can reach your goals quicker.
It’s something Dave Forest has done to great successes in his International Speculator advisory. While average annual returns of 11%, 15%, or 20% may seem a lot or unrealistic (depending on your view), Dave’s average trumps that.
Over the past 10 years, the International Speculator service has recorded an average annual gain of 23.9%. If you took that average annual gain and applied that each year, it turns a starting pot of $100,000 into over $852,000…
Again, you can see how a relatively small increase in returns can make a difference to a portfolio over time. Of course, we’re showing you a “perfect world” scenario.
Stocks don’t go up every year by the same amount. Sometimes, stocks fall during a year. That also affects your returns.
But the lesson is that you can achieve better than average returns. As an example, we’ve shown you that over the past three weeks with Dave’s warrants investing strategy.
That’s a great way to boost returns by making small bets in an alternative asset class. But there are other ways. Each with their own exciting opportunities.
Over the next few days, we’ll share more ideas on how to boost your returns… and how to do it in the safest way possible.
Editor, Casey Daily Dispatch