Learn About DRIPS
Start a DRIP

News and Views
DRIP of the Week
DRIPs A to Z

Free Trial!
Advertise With Us
Terms of Service
Contact Us
About Us


Wednesday, 03/12/2003

So what really have we done since then?
by Steve Gail

"Past Performance is no guarantee of future Results." - But History will give you a better feeling and understanding as to the number of scenarios that might possibly occur.

How many times have we as investors heard the phrase, "Past performance in no way guarantees future results", or some variation of that retort. I know it echoes in my ear everytime I look at an investment that has performed well for only a brief period of time. Investors take heed! I don't think anyone will disagree that as DRIP investors, we should not fall into that age-old trap of looking at one-year performances. However, sometimes we tend not to take a look back to see just how successful or unsuccessful our own long-term game plan is performing. The world today just has too many occurring short term events that can distract the average DRIP investor from his own agenda - LONG TERM INVESTING UTILIZING DIVIDENDS and DOLLAR COST AVERAGING WITH AUTOMATIC REINVESTMENT. I thought it might be interesting to examine some "old school" past performances and see just where we might have been today, had we played the DRIP game a few years ago. There will probably be some varying performances from the numbers that you will see here, however they will vary only as much as an individual would make changes in addition or in subtraction of a regularly scheduled investment in a DRIP Program. Initially, I thought it might be interesting to examine performances of the major indexes.

1. Dow Jones Industrial Averages
2. Dow Jones Transportation Averages
3. Dow Jones Utility Averages
4. Standard and Poors 100 Averages
5. Standard and Poors 500 Averages

Of course there are many more indexes that we could compare, but these are the most common that most of you are familiar with.

Additionally, we will then examine several benchmarks over time, and then compare them with the performances of our Indexes in both the Total Return area as well as dividend return from the prior 3,5 and in some cases 10 years. Let's examine the chart below and make some interesting observations.

EXHIBIT A: [ source morningstar]

The first interesting case in point. Let's look at the total return for all five of the Indexes. As you can see, for the last 1 year, 3 year and 5 year returns all the indexes have been negative, except the Dow Industrials and the S&P 100, who were able to slip by with some barely positive numbers. However, if you compare the ten year performance for all the *Indexes (no ten year numbers for S&P 100), you will find that all four (4) of the Indexes that have 10 year numbers show a positive return. Just from this little bit of information, we can see if one had a short term investment horizon and would have started just about any DRIP Program with a Company in any of the averages, they would have picked up a lot of shares, but they would have definitely been down from their total investment outlay.

But if you were to look at the Dividend returns over the last 5 years you would see more impressively how the Dow Industrials, The Standard and Poors 100 and The Standard and Poors 500 have all approached Dividend percentage returns over nine percent (9%), with only the Dow Transportation and Utilities lagging behind.

In hindsight, one can look just at the little bit of information provided to day and see that time horizon performance can often be misleading. Th DRIP investor has to step back and take a longer view of where he is trying to go and try to avoid being sidetracked by short-term performance returns, when your real goal is longevity.

As I mentioned in a prior article, this may not be the best of times, but we have seen worse. Try and remember that through the last 5 years of returns this country has seen 9-11, the NASDAQ bubble burst, higher unemployment numbers, corporate fiasco's and fraud; yet most of the major indexes (which members all have DRIP plans), still seem to have weathered the storm over the last 10 years. It is only when one gets caught up in the short-term horizon game, that one lets his original investment game plan be challenged and then usually by those who have no game plan at all. In Part two of this article we will examine the performances of our Indexes to some Benchmarks to see if our investment into DRIP programs have kept up with the inflation and savings rate and even the consumer Price Index over time.

So until next we meet,


Copyright 2003

Do not duplicate or redistribute in any form.
          Privacy Statement   Disclaimer   Terms Of Service