Sunday , 18 February 2018


Investing In Equities Carries Substantial Risk: The S&P 500 Roller Coaster Of Returns

Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation?

The original article by Jill Mislinski has been edited here for length (…) and clarity ([ ]) by munKNEE.com – a Site For Sore Eyes & Inquisitive Minds – to provide a fast & easy read.

5-Year Annualized Real Return

The purchasing power of your investment has increased to $20,295 for an annualized real return of 14.24%.

10-Year Annualized Real Return

Let’s increase the time frame to 10 years. The annualized return is considerably smaller than the 5-year time frame. As of the end of last month, your $10K invested 10 years ago has grown to about $21.99K adjusted for inflation, an annualized real return of 7.90%.

15-Year Annualized Real Return

The 15-year time frame is only slightly more profitable. Your one-and-a-half decade investment of $10K has grown to about $32.2K adjusted for inflation for an annualized real return of 7.82%.

20-Year Annualized Real Return

If we extend our investment horizon to 20 years, the roller coaster is less volatile with higher lows and lower highs and realizing an annualized real return of 5.09%.

30-Year Annualized Real Return

The volatility decreases further with a 30-year timeline but even for that three-decade investment the annualized real return for that period was 7.98%.

Annualized returns since 1901 have ranged from less than 2% to over 11% and, as the above charts illustrate, many households have discovered during the 21st century so far, investing in equities carries substantial risk.

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