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Reviewing the S&P 500 Returns Can Provide A lot of Lessons

//Reviewing the S&P 500 Returns Can Provide A lot of Lessons

Reviewing the S&P 500 Returns Can Provide A lot of Lessons

The other day I was talking to a colleague and he asked if I ever really ever took a look at the S&P Returns over the long term, and shockingly I realized I had not.  As soon as I took a look a few things jumped out at me, and I immediately thought of a few “take aways.”

S&P Historical Returns

I took the data from NYU Stern:

YearS&P 500YearS&P 500YearS&P 500
192843.81%1966-9.97%200410.74%
1929-8.30%196723.80%20054.83%
1930-25.12%196810.81%200615.61%
1931-43.84%1969-8.24%20075.48%
1932-8.64%19703.56%2008-36.55%
193349.98%197114.22%200925.94%
1934-1.19%197218.76%201014.82%
193546.74%1973-14.31%20112.10%
193631.94%1974-25.90%201215.89%
1937-35.34%197537.00%201332.15%
193829.28%197623.83%201413.48%
1939-1.10%1977-6.98%
1940-10.67%19786.51%
1941-12.77%197918.52%
194219.17%198031.74%
194325.06%1981-4.70%
194419.03%198220.42%
194535.82%198322.34%
1946-8.43%19846.15%
19475.20%198531.24%
19485.70%198618.49%
194918.30%19875.81%
195030.81%198816.54%
195123.68%198931.48%
195218.15%1990-3.06%
1953-1.21%199130.23%
195452.56%19927.49%
195532.60%19939.97%
19567.44%19941.33%
1957-10.46%199537.20%
195843.72%199622.68%
195912.06%199733.10%
19600.34%199828.34%
196126.64%199920.89%
1962-8.81%2000-9.03%
196322.61%2001-11.85%
196416.42%2002-21.97%
196512.40%200328.36%

 

What I immediately noticed:

  • In 86 years of history how many times did the S&P 500 have 2 consecutive down years? 8 (3 of which were during the great depression era)
  • In 86 years of history how many times did the S&P have 3 consecutive down years? 4 (2 of which were during the great depression era)
  • In 86 years of history how many times did the S&P have 4 consecutive down years? 1 during the great depression
  • After every multi-year contraction was followed by a double digit gain in the first following positive year

Easy Lessons from Looking at the Broad Market’s History

  1. This time is not different – regardless of what the main stream media is saying, repeat it with me, THIS TIME IS NOT DIFFERENT
  2. There will be light at the end of the tunnel – I don’t care how bad it may seem, if you are young enough there will be a positive year around the corner
  3. Asset allocation is especially important if you are older – even the 10% chance you may have 2 consecutive years may want you to limit your equity exposure if you are older
  4. Make sure you have an adequate CASH –  reserve selling during one of those down years is going to hurt over the long term

 

Do you see any other easy lessons?

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By | 2015-11-18T20:16:39+00:00 November 18th, 2015|Investments|0 Comments

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Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

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