I’ve just finished writing the foreword for Akaisha & Billy Kaderli’s new upcoming book The Adventurer’s Guide to Early Retirement, A New Perspective. To help, they sent me a draft copy for review. It is a great read full of humor, wisdom and practical advice.
In it they share this cool calculator…
…and, figuring it was part of my due diligence, I got distracted playing with it.
It’s simple to use. Plug in a dollar amount, a start year, an end year and hit “calculate.” It spits out what that money would have grown to and what percentages that represents.
Let’s look at the 100 years of the 20th Century, 1900-1999, and plug in an investment of $1000. Hit calculate and…
“If you invested $1000 in the S&P 500 at the beginning of 1900, you would have about $21,848,606.87 at the end of 1999, assuming you reinvested all dividends. This is a return on investment of 2,184,760.69%, or 10.51% per year.
“This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 110,061.04% cumulatively, or 7.26% per year.”
Just shy of 22 million dollars from a onetime $1000 investment? That’s the power of compounding right there and and it represents 10.51%/7.26% average annual returns for what has been called the bloodiest century in history. You know, the one with the two world wars and the Great Depression? Not to mention all the other wars and economic upheavals. That century? Yep.
Ok, how about this century’s 22 years so far? Let’s look. 21st Century, 2000-2022, plug in our investment of $1000 and hit calculate…
If you invested $1000 in the S&P 500 at the beginning of 2000, you would have about $4,025.06 at the end of 2022, assuming you reinvested all dividends. This is a return on investment of 302.51%, or 6.29% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 132.81% cumulatively, or 3.77% per year.
Mmmm. Not so great. But not bad given the decade’s multiple stock crashes — 2000-01, 2008-09, 2020 and this year’s bear market. Plus we’ve got another 78 years to pull up those numbers.
Our friends, Akaisha & Billy retired in 1991. How have they done?
If you invested $1000 in the S&P 500 at the beginning of 1991, you would have about $21,663.32 at the end of 2022, assuming you reinvested all dividends. This is a return on investment of 2,066.33%, or 10.14% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 891.08% cumulatively, or 7.47% per year.
Pretty impressive 31 year run, especially given all the turmoil over those years.
I’ve been investing since 1975. How were those 47 years?
If you invested $1000 in the S&P 500 at the beginning of 1975, you would have about $191,228.81 at the end of 2022, assuming you reinvested all dividends. This is a return on investment of 19,022.88%, or 11.61% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 3,355.74% cumulatively, or 7.69% per year.
Not bad, especially given all the turmoil in the world during the first 40 years of my investing career:
Time Machine and the future returns for stocks
Let’s look at a really bad decade, the worst of my life: 2000-2009.
If you invested $1000 in the S&P 500 at the beginning of 2000, you would have about $943.26 at the end of 2009, assuming you reinvested all dividends. This is a return on investment of -5.67%, or -0.58% per year.
This lump-sum investment does not beat inflation during this period, for an inflation-adjusted return of -24.29% cumulatively, or -2.74% per year.
Ouch. Never fun to be in the negative, but for the worst decade? I’ll take it.
How about the inflationary 1970s?
If you invested $1000 in the S&P 500 at the beginning of 1970, you would have about $1,829.88 at the end of 1979, assuming you reinvested all dividends. This is a return on investment of 82.99%, or 6.23% per year.
This lump-sum investment does not beat inflation during this period, for an inflation-adjusted return of -2.20% cumulatively, or -0.22% per year.
This surprised me. I expected the 70s to be the worst of my lifetime, but they have to settle for second.
What about the 1930s, the decade of The Great Depression?
If you invested $1000 in the S&P 500 at the beginning of 1930, you would have about $987.97 at the end of 1939, assuming you reinvested all dividends. This is a return on investment of -1.20%, or -0.12% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 18.70% cumulatively, or 1.73% per year.
Yeah, I was surprised too. 2000-09 remains the worst. That was a humdinger of a crash in 2008-09. Congrats to those of you who held tight and rode it out. You’ve earned your stripes.
But how about if I tilt the board a bit and start that decade in 1929? Let’s capture The Big Ugly Event in all its misery.
If you invested $1000 in the S&P 500 at the beginning of 1929, you would have about $894.52 at the end of 1939, assuming you reinvested all dividends. This is a return on investment of -10.55%, or -1.01% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 10.04% cumulatively, or 0.87% per year.
That worked. Now we have something worst than 2000-09. But just barely, and only for the average annual return. Adjust for inflation and 2000-09 — at -2.74% — remains king.
Here’s how the rest of my seven decades shake out…
1950s:
If you invested $1000 in the S&P 500 at the beginning of 1950, you would have about $5,570.45 at the end of 1959, assuming you reinvested all dividends. This is a return on investment of 457.05%, or 18.74% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 361.33% cumulatively, or 16.52% per year.
1960s:
If you invested $1000 in the S&P 500 at the beginning of 1960, you would have about $2,130.99 at the end of 1969, assuming you reinvested all dividends. This is a return on investment of 113.10%, or 7.86% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 71.87% cumulatively, or 5.57% per year.
1980s:
If you invested $1000 in the S&P 500 at the beginning of 1980, you would have about $4,645.07 at the end of 1989, assuming you reinvested all dividends. This is a return on investment of 364.51%, or 16.60% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 208.67% cumulatively, or 11.93% per year.
1990s:
If you invested $1000 in the S&P 500 at the beginning of 1990, you would have about $5,336.29 at the end of 1999, assuming you reinvested all dividends. This is a return on investment of 433.63%, or 18.23% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 318.64% cumulatively, or 15.39% per year.
20-teens:
If you invested $1000 in the S&P 500 at the beginning of 2010, you would have about $3,551.95 at the end of 2019, assuming you reinvested all dividends. This is a return on investment of 255.20%, or 13.51% per year.
This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 202.95% cumulatively, or 11.72% per year.
Anther piece of data this tool provides is whether lump sum or dollar-cost-averaging worked best. Care to guess?
I’m on record as preferring lump sum…
Why I don’t like Dollar Cost Averaging
…and for the last 70 years I’ve been right.
Only in one decade did DCA prevail — The single worst performing decade — 2000-09. Which, if you read my post, makes perfect sense.
Plug in your own timespans and have fun. Let us know in the comments what you uncover.
