Stock Market History

What is the stock market history?

In 1792 the New York Stock Exchange (NYSE) was created where people met daily on Wall Street. Ever since then, people have been trading stocks on Wall Street.

If you read about the stock market history, you'll see the same trends that we've seen in the last 20 years. When stocks go up and up, people get excited about them and continue to buy and push them up further until there is a breaking point. At that point people realize that they've paid too much or some economic condition changes and they start to sell, sell, sell. The selling creates more selling and there's a panic until the stock market has gotten so low that some people realize that it's too low or the economic condition improve and begin buying again. And then the cycle continues.

The previous paragraph describes many periods of the stock market. You will see it repeated over and over again in history books and you will likely see it repeated over and over again in the future. There are often different worldwide or countrywide events surrounding the stock market moves. For the most part, these events don't affect the long-term gains of the stock market. However, they can have huge effects on the short-term movements. For example, on September 11, 2001 the stock market fell significantly and continued to fall throughout the next week. Due to current business and market conditions, these losses were likely to happen in some form or other in the near future anyway.

It is important to keep your emotions in check during the peaks and valleys because many respectable people will come out and say things that, in hindsight, weren't smart. During the peaks people have talked about the new era of stocks and how they can continue going up and continue to be expensive relative to historical measurements. It happened during the late 20's, the late 60's, the mid 80's, the late 90's, and during the 2000's for real estate and, temporarily, oil. It will happen again and again. No asset class will always go up -- like many recently believed for real estate and oil. Almost the same thing happened in the late 60's that happened in the late 90's -- "tech" and other "hot" stocks became the rage and people were willing to buy at any price. There will never be a new era for stocks where earning growth and dividends don't account for almost all of the true increase in value of a company or stocks in general.

Likewise, keep your composure during the valleys -- like we're in right now. During the valleys respectable people talk about the "death of equities." It happened in the 30's, the 70's, the early 90's, and early 2000's. Not surprisingly, people are doing the same thing now -- not just small-time people, but big name, well respected people. Just as before, companies as a whole are still making money and paying dividends, so there is no reason to worry about your investments in the long term. (You may need to worry about your job -- especially if you're a poor performer. However, discussing that is not within the scope of this website.) Many are fleeing the stock market for safer places until the market recovers. But once the market recovers, those people will have missed out on the big recovery gains! The current stock market prices are cheap by historical comparison. They're on sale. Don't miss out.

Over the long-run, the stock market has returned 10% per year. About half that to dividend payments and the other half is due to earnings growth. Your real return is about 7% due to approximately 3% inflation. Over the short-term you can beat this or you can lose significantly more than 10%, but over a period of 30 years or more, you always get very close to the 7% real return.

If you want some specific historical details about the Dow Jones history click here.

If you want further details about the history of the stock market Peter Lynch tells the story well in his book "Learn to Earn: A Beginner's Guide to the Basics of Investing and Business". It was one of the first books I read about investing and I enjoyed it. I would recommend it to any beginner.

return from stock market history to stock market for beginners

beginner investing made easy home