Unexpectedly Intriguing!
February 7, 2007

We don't often put the cart before the horse here at Political Calculations, but while we were experimenting with how to visually depict the actual worst case real returns ever achieved by the S&P 500 stock market index, we kind of stumbled into the following chart, which we felt deserved its own standalone post (click to enlarge):

Worst Case Real Rates of Return

The chart above depicts our basic findings of the worst-case inflation-adjusted performance of the S&P 500 for all holding periods of 1 to 50 years, on a rolling basis beginning each month from January 1871 through December 2006. The chart assumes full dividend reinvestment, but does not take taxes or commissions and fees into account.

Since this range captures the typical investing "lifespan" of individual investors, we thought it was remarkable that the worst-ever recorded returns to just break even on an investment in the S&P 500 is somewhere between 20 and 21 years, while a positive 3% annualized rate of return will occur sometime between 34 and 35 years.

Meanwhile, for a full career-spanning investing holding period of 45 years, the worst case historical performance of the S&P 500 indicates that the money first invested in the S&P 500 index will return at least 3.6% after inflation.

Although we don't show it in the chart above, as more time passes, the worst-case performance for an investment in the index continues to gradually increase, eventually reaching a range between 5.6% and 6.9% for holding periods running between 100 and 130 years.

The Worst Years Ever for Ending an Investment in the S&P 500

We found that just six years mark the end of the holding periods for the worst ever inflation-adjusted investment performance recorded by the S&P 500. Investments that terminated in 1932, and more specifically in and around June 1932, were by far the worst of the lot, with 24 of the 50 points we charted belonging to this year.

The second worst period to end an investment holding period occurs between 1920 and 1921, which contributed to 14 of the worst 50 year periods. The war years of 1942-1945 is third with 5 of the worst 50 year periods, with 1982 (4), 1974 (2) and 1949 (1) accounting for the remainder.

Labels: , , ,

About Political Calculations



blog advertising
is good for you

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Applications

This year, we'll be experimenting with a number of apps to bring more of a current events focus to Political Calculations - we're test driving the app(s) below!

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

Visitors since December 6, 2004:

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button

JavaScript

The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links
Charities We Support
Recommended Reading
Recommended Viewing
Recently Shopped

Seeking Alpha Certified

Archives
Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.