I have always read/heard about the average 6-8% return in the market. And for the last 10-12 years, I have gone along with that thinking without actually looking at it deeper. And since the market in the last 8 years has been on a year, its been in the news regularly that the 'annual growth last year was 10%, yada yada'.
Today, I was looking to find out how are the indexes calculated and came across this site: Returns Calculator {Full Disclosure: I have nothing to do with that website, it comes up as the 4th result when searching for "how is s&p 500 index calculated"}
What surprised me is that for the life of the S&P, the returns have been around 2%. I figure, ok, that's a long time ago, and US wasn't the industrial powerhouse it has been since WW2. And since our average investment span is 40 years, I figure I should look at the last 40 years to see what the return is.
For 1978 - 2018: 7.664% For 1968 - 2008: 4.021%
Both the above are inflation adjusted and included dividend reinvestments.
Without dividend reinvestments, the numbers are far smaller, .0829% and 4.827% respectively.
The eye opener for me is this: Dividend reinvestments are key. Some stock brokers don't make it easy to reinvest dividends. Eg. Tradeking always issued me the dividends and I didn't realize how critical it was to ensure that I reinvest the dividends.
Just want to lay this out there so that others that are just starting out might learn the criticality of dividend reinvestments and the fact that the average S&P returns are closer to the 6% mark than the 8% that we had gotten used to over the last 8-10 years.
Submitted January 10, 2019 at 07:17PM by fromindia1 http://bit.ly/2M1HLbd
