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In reply to the discussion: So what happened with the DOW today −457.21 [View all]progree
(10,889 posts)17. Thanks for the graph. Here's S&P 500 from 1928 on a logarithmic scale for a different kind of view
Very worthwhile to right click on the image and open in a new tab or window (so as to enlarge it)
I made it after the March 20 2304.92 close, which was the lowest point in 2020 so far except for March 23's 2237 close.
How I made it, and what's special about a logarithmic scale --
https://www.democraticunderground.com/10142452339#post14
In short, the important characteristic of the logarithmic y-axis scale to me is that an upward sloping STRAIGHT line represents a constant percentage increase, e.g. something that rises by e.g. 9% per year (or whatever percent a year) is a straight line on a logarithmic graph like this. (Ditto for something declining by a fixed percentage per year -- it will appear as a downward sloping straight line).
A doubling of the index back when it was like 40 is just as important to wealth (it doubles it) as a doubling when it is at 1000. On a linear scale, the movement of the market in the early years is just about impossible to see because it's all just a slightly wiggling line crawling around the horizontal axis. Whereas on a logarithmic scale, a doubling is the same vertical distance whether its a doubling from 40 or from 1000.
It's interesting how insignificant the dot-com bust and the housing bubble bust and the March 2020 32% crash are, compared to the doubling of the index that occurs about every 9 years ON AVERAGE.
Note this is just the index (dividends are ignored). A graph that included reinvested dividends would reach about triple the amount.
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It's bad, but if you're in the market, you should know not to watch daily ups and downs
Bucky
May 2020
#5
Thanks for the graph. Here's S&P 500 from 1928 on a logarithmic scale for a different kind of view
progree
May 2020
#17
Actually with reinvested dividends it took S&P 500 16 years to recover from Great Depression
progree
May 2020
#31
You make sound points. The main issue is how quickly a person will need retirement money and how
Blue_true
May 2020
#35
Actually, I had in mind the people who need their retirement money, not well-off people
progree
May 2020
#38
If a person needs much more than 4%/year withdrawal, all simulations show they are screwed (will
progree
May 2020
#40
I struggle a lot with which view is the more distorted one - linear or logarithmic
progree
May 2020
#32
It's the logarithmic scale that allows dips, or growth, to look the same whatever the date
muriel_volestrangler
May 2020
#33
I think the peak to trough drop in the Dow index was 89%, meaning $100 became $11, or
progree
May 2020
#34
***FAUCI !!! *** I've been saying for nearly 3 weeks Trump and ManureChin have been lying about
uponit7771
May 2020
#12
It might be more about several of the early reopening states ticking up in cases?
herding cats
May 2020
#29
The market will remain volatile until the COVID numbers drop or a promising drug or vaccine drops
Algernon Moncrieff
May 2020
#20