S&P 500 Fun Facts

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By JLP | April 4, 2007

I finally broke down and bought a copy of Ibbotson’s Stocks, Bonds, Bills, & Inflation or “SBBI” as it is commonly known. I don’t know if it is worth $120 or not but it is pretty cool.

While flipping through it, I found the annual returns for the S&P 500 Index from 1926 - 2006. I manually entered the numbers into an Excel file and then calculated the returns for 5-year holding periods. I then took that information and put together a list of what I call S&P 500 Fun Facts:

NOTE: These are returns for the INDEX, not an actual mutual fund.

I’ll try to do something similar for 10 and 20-year holding periods.

FOLLOW-UP: More S&P 500 Stats

Topics: Index Funds, Investing |

Comments to “S&P 500 Fun Facts”

TFB Says:
April 4th, 2007 at 10:52 am

I suggest that you do this in *non-overlapping* periods. For example, 1988-1992 and 1989-1993 have 4 years in common. The performance in those two 5-year periods are likely close to each other.

Dave W Says:
April 4th, 2007 at 11:01 am

TFB is incorrect…the standard way to do rolling 5-year returns is to do exactly what you did JLP. You could even do 5-year rolling returns on a quarterly or monthly basis to get more observations. This is really interesting stuff…shows that if you have a long timeline it really pays to stack your chips on equities! Doubling my money in 24 out of 77 5-year periods? Sign me up!

D Says:
April 4th, 2007 at 12:45 pm

I do not have the education to argue with the 2 comments before me. I just wanted to say - Thanks! This is good!

jake Says:
April 4th, 2007 at 2:40 pm

Does this account for dividends?

JLP Says:
April 4th, 2007 at 2:42 pm

Jake,

Yes. I didn’t make that clear. These are total returns.

Dave Says:
April 4th, 2007 at 4:13 pm

It would be interesting to see the fun facts when you include inflation. I suppose that you could use CPI data from http://www.bls.gov as a source of inflation data. It is available on a monthly basis from 1913 to present.

lorax Says:
April 4th, 2007 at 6:46 pm

A nice alternative view to this is _Irrational Exuberance_ by Robert Shiller (www.irrationalexuberance.com).

It would be interesting to compare this to other national markets (Japan, Germany, England, Canada). And to include inflation as Dave says. And to compare to treasuries.

Not saying that US large cap stocks aren’t a good investment, just that there’s a big industry for which hyperbole serves well.

Zachary Says:
April 4th, 2007 at 6:46 pm

I wish I had 80 years to invest like that. lol
-Zachary
http://www.seemegetrich.com/

JLP Says:
April 4th, 2007 at 7:34 pm

lorax said:

“Not saying that US large cap stocks aren’t a good investment, just that there’s a big industry for which hyperbole serves well.”

The definition of “hyperbole” is “obvious and intentional exaggeration.” Are you saying I’m exaggerating? I’m merely looking at the historical returns for the S&P 500 Index and reporting my findings.

lorax Says:
April 5th, 2007 at 5:15 am

Not you personally. But the industry fails to mention that markets in most other countries failed to match this return. Or that most of the returns a measured from a point of low valuation to a point of high valuation.

Many well-respected experts and economists, including Bogle, Bernstein, Shiller, and many more suggest that due to the fundamentals, broad market returns are going to be lower until valuations fall or yields rise. According to the fundamentals, long term equities returns won’t be much more than bonds until we get an adjustment.

The hyperbole isn’t quite as bad as it was in 98 & 99, but the it seems to be increasing again. I like to look for a message of “past returns are not an indication of future performance” when giving stats about the markets.

Of course, no one, not even the luminaries mentioned above, can see into the future. It’s possible that this time it’s different, and we can all expect the market to continue to do some heavy lifting.

Finance Findings For Thursday, April 5, 2007 Says:
April 5th, 2007 at 6:02 am

[...] S&P 500 Fun Facts [All Financial Matters]“I found the annual returns for the S&P 500 Index from 1926 - 2006. I manually entered the numbers into an Excel file and then calculated the returns for 5-year holding periods.” [...]

vivek Says:
April 5th, 2007 at 8:39 am

Hi JLP

Based on the facts, it looks like a good investment, I am new to investing and was looking at the last 5 years graph on the S&P, there was a major dip in 2002-2003 period and it has been moving upwards after that. Is this a good time to invest in S&P based funds ?

tinyhands Says:
April 5th, 2007 at 12:43 pm

I don’t know what you’ll find for 10 year periods, but Ray Lucia is fond of saying that there is NO 15 year period that didn’t gain money (although I don’t recall how MUCH gain he usually says). He cites Ibbotson as well.

Advanced Personal Finance » Blog Archive » Friday Favorites #1 - round-up of PF articles Says:
April 6th, 2007 at 6:37 am

[...] JLP at All Financial Matters gives some very interesting S&P 500 data. [...]

AllFinancialMatters » Blog Archive » More S&P 500 Index Stats Says:
April 6th, 2007 at 2:45 pm

[...] At the suggestion of a couple of commenters on my S&P 500 Fun Facts post, I decided to rerun the numbers with inflation included. Here’s what I found along with a link to the source information: [...]

» Some Posts Worthy Of Remark on Blueprint for Financial Prosperity Says:
April 7th, 2007 at 2:53 pm

[...] Like S&P facts? JLP has a bunch of S&P facts. [...]

Ben Says:
April 7th, 2007 at 9:23 pm

JLP, thanks for putting this together, interesting data. It’d be really cool if you could give us the numbers for the NEXT 80 years so I know when to get into and out of the market

Blaine Moore (First Time Home Owner) Says:
April 9th, 2007 at 2:09 pm

Ben,

The best time to get into the market is when it’s going down, as long as you don’t plan on getting out for a while. Heheh.

Steven Peace Says:
February 10th, 2008 at 10:32 pm

Have you ran historicals on the five year segments and in negative years show a carry forward of the previous positive year/rears and do not factor in the negative years?
The index annuity concept with 100% participation

Investment Strategies That Work - Day 3 Is Buy & Hold Dead or Alive? Says:
April 22nd, 2009 at 3:53 am

[...] to look at the strategy of buying and holding the S&P 500 index because its probably one of the best ways to track overall market performance. Here’s more on the S&P 500 from Wikipedia: The S&P 500 is a value weighted index [...]

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S&P 500 Fun Facts