Yesterday, we featured a chart that shows how the sustainable component of corporate earnings, dividends, maps out the major phases of the Great Depression. Today, we're considering a related question: "What if you were an investor in the stock market through the worst of all that?"
To answer that question, we've built a tool to do the math! What we've done is to incorporate our historic data for the S&P 500 and use it to calculate the total value of a series of investments made each month in the months and years containing the worst-ever recorded period of time for investments made in the U.S. stock market.
In doing all that, we've made some assumptions for our hypothetical investment based on actual data:
- The amount invested each month is held constant in terms of inflation. The value you enter in the tool is in constant dollars for the year in which the investment period under consideration ends.
- The price paid each month is the average of that month's closing price per share for the S&P 500.
- All cash dividends are fully reinvested.
- Any commissions, fees, taxes or other transaction costs are paid by the hypothetical investor with money outside the investment.
- The calculated investment values and the average annual rate of return presented are all adjusted for inflation. As with the amount entered, these values are presented in constant dollars for the year in which the investment period under consideration ends.
That might sound complicated, but all you need to do is enter the amount of months and years of investing before the all time bottom of the stock market was hit during the Great Depression, as well as the total number of months and years that you'd like to see the hypothetical investment run in total. Enter the inflation adjusted amount that you would invest in the S&P 500 each month, and we'll do the rest!
As for our default data, there's really nothing special about it. The default data is simply set up to correspond with a period of time consistent with the stock market hitting rock bottom just three years before a hypothetical investor might choose to retire and pull all their accumulated funds out of the market after a long career....
In using this tool, you'll want to tweak the time periods that you enter - you'd be amazed at how much a difference just six months might make!
For an upcoming project, we'll compare this worst actual case of stock market investing with an alternative investment!
Labels: investing, SP 500, worst case
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
Thanks in advance!
Closing values for previous trading day.
This site is primarily powered by:
CSS Validation
RSS Site Feed
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
