Have you ever wanted to test out an investing strategy using historic stock market data? Or maybe just wanted to find out how much a hypothetical investment in the S&P 500 made between January 1871 and May 2009 would be worth after adjusting for inflation? Both with and without reinvesting dividends over all that time?
Today, we're putting all the S&P 500 data we have to work for you just so you can answer questions like these!
All you need to do is to select the dates you want to run your hypothetical investment between and to enter the amount of money to invest either from the very beginning or to add each month (beginning with that first month you select) for the duration that your investment runs. We'll determine how much your investment would be worth assuming the amounts invested are adjusted for inflation for each month the investment is active and accounting for the effects of either not reinvesting dividends along the way or fully reinvesting dividends.
Our other main assumptions are that all commissions, fees, and taxes are paid by our hypothetical investor either when money is invested or after money is withdrawn from the investment, where the tool provides an estimate of the investment value during the month you select for the end date. We'll also calculate the average annualized rate of return you would have earned if you had invested all the money you did from the very beginning and also the growth factor, which is a quick and easy way to see how much the amount you invested through time has grown!
And it all starts... now!
Running some short-term numbers for fun, we find that if you started with $0.00 and invested $100.00 each month beginning in January 2009, the $200 you would have invested before selling in March 2009, when the S&P 500 hit bottom during the Great Recession, would have fallen in value to $182.29 for a growth factor of 0.91X, which corresponds to an annualized loss of over 42% if you had been reinvesting dividends.
On the other hand, if you had kept investing through May 2009, the $400 you put to work in the S&P 500 would have risen in value to be worth nearly $445 (1.11X your total amount invested) for an annualized gain of about 38%!
But for real fun, see how much $1,000 invested in January 1871 would be worth in May 2009 - both with and without the effects of reinvesting dividends! We don't want to spoil the surprise, but there's a $102,895,170.93 difference! On the other hand, if you want to run a true-to-life worst case type scenario, set June 1932 as your ending date, since that month marks the bottom for stock prices during the Great Depression. If you want a best-case type scenario, set August 2000 as your end date, where that month marks the peak of the Dot-Com Bubble.
Update 26 December 2019: We have implemented some significant changes to this tool! The biggest change involves replacing the inflation-adjusted results the tool previously provided with nominal-only results that would match the actual amounts that would be accumulated for the historical investing scenarios you might consider, largely because nobody either invests or spends inflation-adjusted dollars. If however you're interested in those results, we have archived the previous edition of the tool where you can still use it as it appeared in its final incarnation.
Other changes we've implemented with this update provide more information about the performance of your hypothetical investment through time as you're seeking to build up its value. If you're on the opposite end of your investing lifepsan, please take advantage of our Cashing Out of the S&P 500 tool, which we introduced earlier in December 2019. Our thanks to all our readers who have provided suggestions and feedback!
We'll continue updating the tool monthly, approximately at the same time we update our S&P 500 At Your Fingertips tool, which is where you can access the historic data for the S&P 500 index value, as well as its earnings, dividends, and more.
Labels: current, dividends, investing, SP 500, stock market, tool
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.
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