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brush2805

Long Term Investment

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My recently deceased father's house sold at auction today for £156,000.

It was purchased in 1963 for £2750.

I was wondering if there was any way to compare investments over such a long period. I know some of you are much better at such things than myself.

What was the return on the property as an investment?

How does it compare with inflation?

If the £2750 had been invested in the FTSE100 (or similar) with dividends re-invested what would that be worth now?

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As far as i can ascertain stuffs gone up about 10 fold.

The dow jones was 600-700 points for most of the 1960s, 8000 now.

Taking 1987 as a 100 base for inflation, inflation was at around 15 in the mid '60s, it was 152 in 2004

http://www.statistics.gov.uk/articles/econ...s/ET626_CPI.pdf

So on the face of it housings gone up 50 fold, or 5 times as much as the stock market or general inflation.

Probably not very accurate but ill let someone else spend the time disproving me.

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Five Ways to Compute the Relative Value of a U.K. Pound Amount, 1830 to Present

http://www.measuringworth.com/ukcompare/result.php

Current data is only available till 2007. In 2007, £2750 0s 0d from 1967 was worth:

£35,989.57 using the retail price index

£36,329.81 using the GDP deflator

£72,437.67 using the average earnings

£85,204.44 using the per capita GDP

£94,531.21 using the share of GDP

Edited by OnlyMe

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From http://www.measuringworth.com/ukcompare

Current data is only available till 2007. In 2007, £2750 0s 0d from 1963 was worth:

£41,478.33 using the retail price index

£42,694.78 using the GDP deflator

£92,152.44 using the average earnings

£110,035.27 using the per capita GDP

£125,117.03 using the share of GDP

Will be interested to hear views here of other investments such as stocks, precious metals, other commodities, etc.

Does this also indicate how far the house prices might fall?

edit: SNAP!

Second edit: the OP asked for 1963 not '67

Edited by erat_forte

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From http://www.measuringworth.com/ukcompare

Will be interested to hear views here of other investments such as stocks, precious metals, other commodities, etc.

Does this also indicate how far the house prices might fall?

edit: SNAP!

Second edit: the OP asked for 1963 not '67

Oops..... 1963

Current data is only available till 2007. In 2007, £2750 0s 0d from 1963 was worth:

£41,478.33 using the retail price index

£42,694.78 using the GDP deflator

£92,152.44 using the average earnings

£110,035.27 using the per capita GDP

£125,117.03 using the share of GDP

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Stock Market

http://findarticles.com/p/articles/mi_m109...8/ai_111856309/

The rates of return expected for pension assets resemble the returns expected for equities among investment professionals. Thus, the mean 30-year stock market return forecast by 510 finance and economics professors in August 2001 was 9.1 percent, with half the returns falling in the 8.0 to 10.5 percent range (Welch 2001, p. 4). Nine percent is also approximately the historical long-run rate of return for equities. The compound average growth rate of annual total return to investment in the stock market, including reinvested dividends, has been

8.9 over the last 132 years (1871 through 2002). (1) But if we analyze the sources of total return to investment in stocks, both before and during the recent boom, we will see that achieving an average total return of nine percent or better for equities over the next 30 years implies a scenario that many will think unlikely.

.......

So 8.9% compounded over 46 years with re-invested dividends gives

138,872.15

Using:

http://www.moneychimp.com/calculator/compo..._calculator.htm

Except that it would be lower due to tax on dividends, minus some as well for CGT no doubt in circustances where stock was sold for various reasons.

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Except that it would be lower due to tax on dividends, minus some as well for CGT no doubt in circustances where stock was sold for various reasons.

Wouldn't that be included in an investment professional's net returns, as in a pension or endowment fund?

How much was spent on the house during that time?

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