This is from chapter 1 of my book. Written in April 2020
Historical returns of S&P 500 and averages
Let’s look at the annual returns of the S&P 500 since 1926:
So we see some years it’s more than 10% and in many years its less than 10%.
Ok, let me simplify the above chart and show it differently. The horizontal axis in the chart below shows the annual returns and each bar represents the # of years when the return has been in that bucket.
Notice in the figure above the leftmost bar the return of between -40 to +45% happened once in the lifetime and that was in the depression years. It represents the year 1931.
Here is the annual summary since 2000
For people who started investing in 2009 or later they haven’t been through a proper bear market and 2020 is the first time they have experienced a 30% drawdown.
With all the above charts the main takeaway is that markets do not move in a straight line….and markets can go down …for a long time…they can move sideways for a long time. Remember all the financial websites say that past returns are not an indication of future results…they refer to this…the past rosy results that we see from 2009-2019 are not the indication that those returns we will keep having in the future.
2009-2020 has been one of the longest bull runs in history. And even the worst of investors have got positive returns…since in a bull market anyone can make money.
Going back 90 years in time, the average yearly return of the S&P 500 is 9.8% a year.
This means strictly investing your money in the S&P 500 over a long term time horizon not only beats inflation, allowing you to keep your hard-earned money, but also provides additional income