01.03.16: Stock exchange

Wall Street entrance to New York Stock Exchange, New York City. 

PHOTO OF THE WEEK ARCHIVES

Technical information

Date/time:
Nov. 20, 2008,
2:59 p.m.

Location
40°42’26” N,
74°0'40" W
(Show in Google Maps)

Camera: 
Canon EOS 40D

Lens: 
Canon EF 28-135 f/3.5-5.6
  (85mm) 

Aperture: 
f/5.6

Shutter: 
1/30th second

ISO: 
800

When people think of the New York Stock Exchange, they think Wall Street.

And Wall Street does border the NYSE building. This photo shows an entrance at 11 Wall Street, which is also the mailing address for the exchange. But the main entrance, the one with the giant columns and large American flag often shown on TV, is at 18 Broad Street between Wall Street and Exchange Place. That’s around the corner from this Wall Street entrance.

I’ve found two locations where I can get a recognizable photo of the New York Stock Exchange with a street sign that says Wall Street in the foreground: this one and a spot atop the stairs of Federal Hall across from the intersection of Wall and Broad that provides a view of the Broad Street entrance.

I wanted the Wall Street sign in the foreground because it’s Wall Street that people know. The eight-block-long street has become synonymous with the financial markets, banking and the economy in general. Through history there have been a number of exchanges and financial firms located in the Wall Street area of Lower Manhattan. Many are now located elsewhere, but the phrase “Wall Street” is still used to identify investment or financial matters.

I intentionally selected this Wall Street photo as my first photo-of-the-week for 2016 because this is the time of year when people tend to review their financial situation and make changes to prepare for the coming year.

As a retiree I pay close attention to what happens on Wall Street. We rely on the performance of our investments, through gains and dividends, to fund our lifestyle in retirement.

But the sometimes-wild daily swings in market performance that grab the headlines don’t interest me (although I do cringe when the Dow Jones Industrial Index, the stock market index commonly cited in the media, drops several hundred points in a day). As a long-term investor I’m more interested in the longer-term performance trends: six months, a year, five years, 10 years. The market moves up and down, but history shows that over time the ups more than make up for the downs.

For instance, the Standard & Poor’s 500 Index, an equity index tracking 500 large companies on the New York Stock Exchange and NASDAQ that is considered most representative of stock market performance, decreased 0.73 percent in 2015 (but was actually up 1.38 percent if dividends are included). It was up 11.39 percent in 2014 (or 13.69 percent if dividends are included). Look at 2015 alone and the market was flat. Look at the two-year performance and the market was up more than 10 percent. That’s a good return on investment.

Through the almost 90-year history of the S&P 500, the average annual return on investment is around 10 percent, or around 7 percent when adjusted for inflation. There are years that are much better than that, and there are years when the market loses money. In fact, 2015 was the 11th down year since 1970, including three in a row between 2000 and 2002 when the market lost half its value and 2008 when the S&P dropped almost 40 percent. But there have also been 12 years since 1970 when the S&P has gained more than 20 percent, including three years with gains over 30 percent.

The years with deep market declines are troubling times for those of us who rely on investment performance for income. The good news is that swings in stock prices don’t change the dividends being paid. Stock dividends provide income for an investor. And stock-index declines are paper losses that don’t turn into real-world losses unless a stock is sold for less than its original purchase (or basis) price. Investors who panicked and sold holdings during the 40-percent decline in 2008 likely lost money. Those who were patient and held their investments were rewarded. Even with the slight decline in 2015 the value of the S&P 500 is up more than 135 percent since the end of 2008.

Over the long term, investing in stocks has provided a nice return. Proof? A dollar invested on Jan. 1, 1970 in stocks included in the S&P 500 and left in place through the ups and downs would be worth more than $89 today. And that doesn’t include any dividends. I’ll take that.

As financial advisors always caution, the market’s past performance is no guarantee of future price appreciation. But as an investor I’m confident that riding through the ups and downs will still be beneficial over time.

Each week I will post a photo from my collection with an explanation of how I got the shot. Previous photos of the week are in the archives.