S&P 500 Fun Facts

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:

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

21 responses to S&P 500 Fun Facts

  1. 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.

  2. 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!

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

  4. Does this account for dividends?

  5. Jake,

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

  6. 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.

  7. 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.

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

  9. 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.

  10. 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.

  11. 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 ?

  12. 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.

  13. 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 :)

  14. 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.

  15. 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

  16. Thats really interesting

    its a nice idea about investing…. way of segmenting is really great

    thanks for sharing

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