How Much Will Your Investment Be Worth?

One of the open questions I have re: investing is what – realistically – my investments will be worth after X # of years. Of course, one can estimate 3% annual return on the S&P 500 to be “conservative” and 10% to be the opposite, but in reality, what is the likely average annual return of the stock market?

While there’s no way to predict the future, lucky for us, there is a way to look at historical data to understand how we’d answer this question if we were to begin investing, say, in 1980.

According to this calculator – The S&P 500 Dividends Reinvested – we can find out that answer:

Scenerios

  • We started investing in 1990, and stopped in 2010, giving us 20 years of investment.
    • Total S&P 500 Price Return: 256.374% (inflation adjusted: 118%)
    • Annualize S&P 500 Price Return: 6.6% (inflation adjusted: 3.974%)
    • S&P 500 Return, Dividends Reinvested: 437.278% (inflation adjusted: 228%)
    • Annualized S&P 500 Return, Dividends Reinvested: 8.770% (inflation adjusted: 6.13%)
  • We started investing in 1984, and stopped in 2014, giving us 30 years of investment.
    • Total S&P 500 Price Return: 1094.274% (inflation adjusted: 427%)
    • Annualize S&P 500 Price Return: 8.6% (inflation adjusted: 5.7%)
    • S&P 500 Return, Dividends Reinvested: 2299% (inflation adjusted: 960%)
    • Annualized S&P 500 Return, Dividends Reinvested: 11.175% (inflation adjusted: 8.19%)
  • We started investing in 1974, and stopped in 2014, giving us 40 years of investment.
    • Total S&P 500 Price Return: 2829% (inflation adjusted: 538%)
    • Annualize S&P 500 Price Return: 8.8% (inflation adjusted: 4.7%)
    • S&P 500 Return, Dividends Reinvested: 1204% (inflation adjusted: 1963%)
    • Annualized S&P 500 Return, Dividends Reinvested: 12.049% (inflation adjusted: 7.8%)
  • We started investing in 1964, and stopped in 2014, giving us 40 years of investment.
    • Total S&P 500 Price Return: 2239% (inflation adjusted: 206%)
    • Annualize S&P 500 Price Return: 6.5% (inflation adjusted: 2.2%)
    • S&P 500 Return, Dividends Reinvested: 10367% (inflation adjusted: 1270%)
    • Annualized S&P 500 Return, Dividends Reinvested: 8.748% (inflation adjusted: 5.3%)
  • We started investing in 1999, and stopped in 2014, giving us 15 years of investment.
    • Total S&P 500 Price Return: 37.5% (inflation adjusted: -2.845%)
    • Annualize S&P 500 Price Return: 2.1% (inflation adjusted: -.192%)
    • S&P 500 Return, Dividends Reinvested: 81% (inflation adjusted: 28%)
    • Annualized S&P 500 Return, Dividends Reinvested: 4% (inflation adjusted: 1.6%)

Well, what this shows us is that generally investing in the S&P index over the long term works out fairly well. After inflation with dividend reinvestments 5% is a reasonable conservative estimate annual return for a long-term investment. However, if you started investing in 1999 and have invested for 15 years, you’d pretty much be at break even at this point (assuming you put all your money in up front.)

I’m still looking for a more robust calculator that enables one to input annual investments and see what these would have turned out with historic data. Do you know where one exists or care to build one I can use? 🙂

 

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2 comments

  1. James says:

    Don’t waste your time with these calculators. If you want to get better returns than the overall market, then really apply yourself to learn everything about what you’re investing in and pick few areas you know very well.
    Otherwise, just buy a low fee index fund consistently over time while focusing on your career and you’ll do fine even if you won’t get as rich as quickly as you want to.

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