The S&P 500 — Since 1871
Kurt Brouwer July 21st, 2007
Here is a great example of why I love the Internet and what it has meant in terms of disseminating information.
The Political Calculations website [and no, I don't really understand what the name means] has a very useful, fun and interesting tool that lets you calculate S&P 500 returns versus inflation for any period between the present and 1871. They call it the S&P 5oo At Your Fingertips. Here’s how they describe the tool in tongue-in-cheek terms taken right from a late night television ad for a set of knives:
‘…The tool will provide the average index value of the S&P 500 for the given month and year, the associated dividends and earnings for that month and year, not to mention the dividend yield and the price to earnings ratio. For good measure, we threw in the value of the Consumer Price Index as well!
But wait, that’s not all! We did all this for a second date that you might select as well – and then we really get busy! Our tool will find the annualized rate of return for an investment made in the S&P 500 between the two dates you select, both with and without considering the reinvestment of dividends in the index.
And then, there’s even more! For no extra charge, we’ll also factor in inflation into the calculations and find the rate of inflation between the two dates you select, not to mention the inflation-adjusted rates of return for an investment made in the S&P 500 between the two dates as well!
For the data, they use S&P results as compiled by Professor Robert Schiller of Yale, which are available from him here. And, my hat is off to Professor Shiller for making this data available to the world.
So, if you would you like to know the average annual return (including dividends) of the S&P since 1871, now you know where to go. What was the return since 1871? Easy, it’s 9.2%. Want that after inflation? It’s 7.11%. What was the average rate of inflation for that period of 136 years? 2.09%.
What about shorter periods, say January 1980 through June 2007? The average annual return was 13.17%. Inflation ran at an average of 3.66%, for an average, real (after inflation) return of 9.51%.
Pretty impressive rate of return and a pretty impressive tool.
- Investing , Personal Finance
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[...] 1800s. Professor Robert Shiller at Yale has the data for 1871 to the present for the stock market. Here’s a summary. It shows how stocks have returned 7.11% since 1871, inflation adjusted. Gold, by comparison, has [...]