Actual Returns of the S&P 500

I was hesitant to write an email for this week.

Why?

Well because I spent the week doing the boring task of analyzing my portfolio allocation.

In doing that though I got into some S&P 500 data that you might find interesting.

Especially if you are new to investing.

Let’s check it out.

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“I love money. I love everything about it. I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline powered turtleneck sweater. And, of course, I bought some dumb stuff, too.” --Steve Martin

A quick backstory on the S&P for those who might not know what it is.

The S&P 500 tracks the largest 500 companies in the United States.

Since it’s start in 1926 it has grown to be one of the most popular indices in the world.

Investors have flocked to it for it’s strong history of returns, but just how good are they?

Running The Numbers

Cracking open the history book we can see that the S&P 500 has returned an annualized average of roughly 10%-11% per year since inception.

So where does the 7%-8%% return that everyone talks about come from.

That is adjusted for inflation.

So technically, they are both correct.

Shortening the time frame from January of 2020 to January of 2021 the S&P has returned 6.7% or 4.5 % annually adjusted for inflation.

That 4.5% number is a little surprising but this average will change depending on what time frame you select.

(if you want to play around with the dates here is the S&P 500 return calculator I used.)

If there is one thing to know about the stock market is that any argument can be proven correct by selecting the right dates.

Over The Long Term

Zooming out, since inception the S&P 500 has experienced 70 positive returning years and 25 negative returning years.

Let’s hope history repeats itself.

Even if we go back to the last 20 years this correlation remains.

Here is a tweet where I covered just that.

The lesson here is that your odds of having a higher return increase with time.

As every investing account on Twitter says.

TiME iN tHE mARket >>> tiMINg tHe mArKEt

It’s true though.

One of the best way to invest into the S&P is through index funds and ETFs.

Index Fund Investing 101 covers all the secrets for making sure you get the most out of the S&P 500.

Leverage the best companies in the world to work for you.

Where did all the laser eye profile pictures go???