After all if you are the owner of a stock your share of the earnings belongs to you whether it is distributed in the form of a dividend, or if it is retained by the company to build the business. Your business. So why not think of it as a return on your investment.
Lets have a look at some rates of return as published by the Wall Street Journal. I'll concentrate on the Dow Jones Industrial Average. The others are there to be examined if the mood takes you. I'll focus on this year though the table also shows last year for comparison. And the forecast earnings are presented as a PE based on the current price to help you look into the future.
Yields on stocks vs. yields on bonds
In the UK
Even central bankers have caught the bug
Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk- averse investors toward equities.
In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves.
“In the last year or so, I have spoken with 103 central banks on diversification,” Gary Smith, London-based global head of official institutions at BNP Paribas Investment Partners, which oversees about $649 billion, said in a phone interview. “If reserves are growing, so are diversification pressures. Equities are not for every bank tomorrow, but more are continuing down this path.”
Managers of banks’ assets are looking for alternatives to holding government bonds after efforts to stimulate growth from the Federal Reserve, the Bank of Japan and the Bank of England helped send yields near to record lows. Central banks’ foreign- exchange holdings have increased by about $8.5 trillion globally in the past decade, exceeding levels needed for day-to-day currency administration.
The market today
Today the markets seem to be taking a breather, so far.