A good math exercise (or spreadsheet activity) that also teaches students about a popular stock market index and the power of compounding.

It starts with a simple question: Do you think the Dow Jones Industrial Average will hit a 1,000,000 in one hundred years?

From MarketWatch:

Doubling, even tripling on that belief that U.S. stocks are the best long-term bet around, he tossed in a fairly bullish call. Buffett said he expects the Dow Jones Industrial Average to be ”over 1 million” in 100 years. The index was at 81 around 100 years ago, he said, so that isn’t such a far-fetched notion.

So, there are a few questions for your students to unpack here:

• What is the Dow Jones Industrial Average (and why does it matter)?
  • Investopedia has a good definition here: 
• What is the current price level for the Dow Jones today?
  • Yahoo Finance is a good source for price information
• How much has it gone up in the past 100 years?
• How much would it have to grow in the next 100 years to hit 1,000,000?
• How many of the current 30 companies in the Index do you you anticipate would be in the index in 100 years?
  • Here were the original components of the Dow Jones Industrial Average. 

I created a Google Sheet so students can plug in their estimates (see highlighted cells) for the annual return for the Dow Jones has been over the past 100 years and what the return would need to be over the next hundred years to hit 1,000,000. 

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Check out this popular NGPF Activity (hat tip to NGPF Fellow, Andrea Stemper for the idea) which will teach your students the concept of index funds in a fun and engaging way. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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