How much Long-Term Wealth has been Built with Equity Investing in the US Stock Market?
This article explores how much return has come from the US stock market using data from the 1870s.
This article explores how much return has come from the US stock market using data from the 1870s.
The US stock markets is one of the oldest stock markets in the world with two important characteristics:
For this analysis, we have used data from Prof. Robert Shillerâs website for historical index return. We have data from the 1870s and are using the S&P 500 index, which represents the largest 500 US companies, as a proxy for the US stock market. In all the charts and tables below, we have adjusted the index price returns with dividends and so these are S&P 500 total index returns. We have not adjusted for inflation.
The charts show the same data but we have used a logarithmic scale for the blue graph since the linear scale, in yellow, looks flat for most of the period and will hide the price movement in the early periods.
Join the Arthgyaan WhatsApp community: You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.Average, max and min returns
Metric | Average | StdDev | Median | Minimum | Maximum |
---|---|---|---|---|---|
Any 1Y period | 8.2% | 19.3% | 9.4% | (-64.8%) | 127.7% |
Any 2Y period | 7.3% | 13.3% | 8.0% | (-52.1%) | 48.0% |
Any 3Y period | 7.0% | 10.4% | 8.0% | (-43.1%) | 34.9% |
Any 5Y period | 6.7% | 8.0% | 7.3% | (-21.1%) | 29.1% |
Any 10Y period | 6.4% | 5.0% | 6.1% | (-8.0%) | 17.0% |
Any 15Y period | 6.1% | 3.9% | 5.8% | (-4.7%) | 16.4% |
Any 20Y period | 6.0% | 3.2% | 5.5% | (-2.3%) | 14.7% |
Any 30Y period | 6.0% | 2.3% | 6.2% | (-0.3%) | 11.0% |
Any 50Y period | 5.8% | 1.9% | 5.9% | 1.5% | 10.2% |
Any 75Y period | 5.9% | 1.4% | 5.6% | 3.4% | 8.7% |
Long-term returns
Medium-term returns
Short-term returns
Here we analyse the XIRR of a SIP run with a fixed dollar amount being invested.
Average, max and min returns
Metric | Average | StdDev | Median | Minimum | Maximum |
---|---|---|---|---|---|
Any 1Y period | 8.7% | 20.9% | 9.9% | (-72.9%) | 127.5% |
Any 2Y period | 7.8% | 15.2% | 9.3% | (-64.6%) | 45.8% |
Any 3Y period | 7.4% | 12.0% | 9.0% | (-59.0%) | 40.8% |
Any 5Y period | 7.1% | 9.1% | 7.4% | (-45.6%) | 32.9% |
Any 10Y period | 6.7% | 5.7% | 6.8% | (-19.0%) | 22.4% |
Any 15Y period | 6.5% | 4.5% | 6.7% | (-9.3%) | 16.6% |
Any 20Y period | 6.3% | 3.7% | 6.1% | (-5.9%) | 15.5% |
Any 30Y period | 6.2% | 2.7% | 6.2% | (-2.8%) | 12.6% |
Any 50Y period | 6.1% | 2.0% | 6.6% | 0.5% | 9.8% |
Any 75Y period | 6.3% | 1.4% | 5.9% | 3.3% | 8.5% |
There are two main observations here:
Long-term returns
Medium-term returns
Short-term returns
Here we analyse the XIRR of a SIP run with a 10% step up (Year 1 = $1,000/month, Year 2 = $1,100/month etc.) every year.
Average, max and min returns
Metric | Average | StdDev | Median | Minimum | Maximum |
---|---|---|---|---|---|
Any 1Y period | 8.7% | 20.9% | 9.9% | (-72.9%) | 127.5% |
Any 2Y period | 7.8% | 15.2% | 9.3% | (-65.0%) | 46.0% |
Any 3Y period | 7.4% | 12.1% | 9.1% | (-59.8%) | 41.0% |
Any 5Y period | 7.1% | 9.3% | 7.5% | (-48.2%) | 33.4% |
Any 10Y period | 6.8% | 6.0% | 7.1% | (-25.0%) | 23.5% |
Any 15Y period | 6.6% | 4.9% | 6.9% | (-15.7%) | 17.6% |
Any 20Y period | 6.4% | 4.1% | 6.6% | (-12.3%) | 16.1% |
Any 30Y period | 6.3% | 3.2% | 6.4% | (-9.3%) | 13.8% |
Any 50Y period | 6.4% | 2.6% | 7.2% | (-6.8%) | 11.3% |
Any 75Y period | 7.1% | 1.5% | 7.5% | 2.7% | 10.2% |
We see here that even a long-term SIP of 50 years, which requires someone to start investing at say age 20 and continue until age 70 does not imply that the will necessarily make money.
Long-term returns
Medium-term returns
Short-term returns
While India had stock markets since the 1930s, we have easily available index data only from the 1970s for which we have SENSEX data. The US market has more than 100 yearâs more data and has situations like the Great Depression, two World Wars, 1970s oil shocks etc for which it is difficult to get data for India. The key takeaways are:
This article shows how a single-income middle aged couple with two small children reach their retirement and childrenâs goals.
This article shows how a double-income couple with a 2-year old reach their FIRE dream at the age of 50.
This article shows how a double-income couple with a newborn child can invest for their future goals of FIRE and real-estate investment.
This article shows how a young just-married couple can invest for future goals using the Arthgyaan goal-based investing tool.
Did you welcome a bundle of joy in your 40s? This article will discuss ways of planning the childâs (and yourâs financial future)
This article shows how a very typical salaried couple with one child can invest for future goals using the Arthgyaan goal-based investing tool.
This article shows the maturity amount of investing in the Public Provident Fund (PPF) for 15 years as per historical interest rates.
Published: 22 October 2023
5 MIN READ
Home loan rate hike? You can prepay to keep EMI and tenor same. This post shows how.
Published: 29 October 2023
2 MIN READ
This article shows how an investor should invest a lump sum amount in the stock market when the market has reached an all time high.
Published: 10 December 2023
4 MIN READ
As the market keeps rising to new all-time high figures, how much returns should equity investors expect from their investments running in SIP form.
Published: 8 December 2023
3 MIN READ
1. Email me with any questions.
2. Use our goal-based investing template to prepare a financial plan for yourselfDon't forget to share this article on WhatsApp or Twitter or post this to Facebook.
Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.
More posts...Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.
This post titled How much Long-Term Wealth has been Built with Equity Investing in the US Stock Market? first appeared on 25 Oct 2023 at https://arthgyaan.com