# Question about stock market **URL:** \ **Category:** Factual Questions\ **Created:** [November 23, 2008, 7:43pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131 "2008-11-23T19:43:48Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Crafter\_Man](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/crafter_man/32/458_2.png) [@Crafter\_Man](https://boards.straightdope.com/u/Crafter_Man)\ **Post date:** [November 23, 2008, 7:43pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/1 "2008-11-23T19:43:48Z")
I’ve heard people say that, over time, you are virtually guaranteed to make money in the stock market as long as you’re well diversified. I think it was Clark Howard who said that, if you look at any 10-year interval (e.g. 1958 to 1968), money invested in the stock market at the beginning of the interval (1958) would increase in value an average of 7% by the end of the interval (1968). I tried finding some data and charts that supported this figure, but couldn’t find anything. So based on the historical performance of the stock market, how long would I have to keep my money in the market to make, for example, an 8% return? Or a 9% return? Just looking for some data that addresses this. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [November 23, 2008, 8:02pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/2 "2008-11-23T20:02:19Z")
I do not think there is any way to answer this because it depends on the index you choose and then you would have to be deversified in exactly the same way. Investing any other way might mean losing money or making more. ---
**Author:** ![Crafter\_Man](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/crafter_man/32/458_2.png) [@Crafter\_Man](https://boards.straightdope.com/u/Crafter_Man)\ **Post date:** [November 23, 2008, 8:10pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/3 "2008-11-23T20:10:50Z")
> [@sailor](#): > > I do not think there is any way to answer this because it depends on the index you choose and then you would have to be deversified in exactly the same way. Investing any other way might mean losing money or making more. I understand. But I’m looking for typical/average data. Or investing in an index fund. ---
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [November 23, 2008, 8:48pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/4 "2008-11-23T20:48:29Z")
Crafter\_Man: Just look at a chart describing the S&P500 over time. That’s the closest proxy for “the market as a whole” that you’re going to find without making it yourself. ---
**Author:** ![dgrdfd](https://avatars.discourse-cdn.com/v4/letter/d/eb8c5e/32.png) [@dgrdfd](https://boards.straightdope.com/u/dgrdfd)\ **Post date:** [November 23, 2008, 9:08pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/5 "2008-11-23T21:08:56Z")
I think I see what he’s getting at and it’s an interesting question. Suppose you took the S&P500 and wanted to know, historically, if you invested $X on the worst day to invest the max time you would have had to have waited to achieve an annual return of y% would have been Z years. It would be interesting to see for a y of 0 \>= to 10. For instance, suppose I have money to invest today. I really want to get a 6% annual return on this money. Historically speaking (and there are certainly no guarantees going forward), what’s the max time I would have had to have left the money in to have gotten a 6% return. You would assume the worst case scenario would be where you invest one day and the market tanks. How many years would I have had to wait to get my money back to an amount equivalent to a 6% annual return? At least I think that’s what the OP is asking. ---
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [November 23, 2008, 10:06pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/6 "2008-11-23T22:06:39Z")
Check links and charts from here: > **[S&P 500](https://en.wikipedia.org/wiki/S&P_500)** > > The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of December 31, 2021, according to surveys, more than $7.1 trillion was invested in assets tied to the performance of the index. > The S&P 500 index is a free-float weighted/capitalization-weighted index. As of September 30, 2023, the nine largest compan... ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [November 23, 2008, 10:06pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/7 "2008-11-23T22:06:50Z")
It’s a tricky question because of the random ups and downs of any day on the market. [This chart](http://finance.yahoo.com/q/bc?t=my&s=%5EDJI&l=on&z=m&q=l&c=&c=%5EGSPC) ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [November 23, 2008, 10:13pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/8 "2008-11-23T22:13:35Z")
I took to long to edit that post, so let’s try again… It’s a tricky question because of the random ups and downs of any day on the market. [This chart](http://finance.yahoo.com/q/bc?t=my&s=%5EDJI&l=on&z=m&q=l&c=&c=%5EGSPC) shows the Dow Jones Industrial Average and the S&P 500. Note that if you invested in the Dow just before the 1929 crash it would have taken until 1954 just to get your money back – no profit. Since then it’s been an upward trend, but not that for both indices, the 1965-1985 period is more or less flat. In any random 10-year period during that time, you could have made some money, broken even or perhaps lost some. It’s only since 1985 that the 10-year profit seems to be generally true on for any given date, but the 2000+ timeline isn’t done yet. ---
**Author:** ![dgrdfd](https://avatars.discourse-cdn.com/v4/letter/d/eb8c5e/32.png) [@dgrdfd](https://boards.straightdope.com/u/dgrdfd)\ **Post date:** [November 23, 2008, 10:23pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/9 "2008-11-23T22:23:47Z")
> [@kunilou](#): > > Note that if you invested in the Dow just before the 1929 crash it would have taken until 1954 just to get your money back – no profit. I don’t think that includes dividends. When including dividends I have heard (and I have neither the software nor the data to actually prove this) that someone who invested all their money in 1929 (very unlikely) still would have broke even in about 1936. ---
**Author:** ![dgrdfd](https://avatars.discourse-cdn.com/v4/letter/d/eb8c5e/32.png) [@dgrdfd](https://boards.straightdope.com/u/dgrdfd)\ **Post date:** [November 23, 2008, 10:31pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/10 "2008-11-23T22:31:34Z")
Okay, I actually found this that seems to confirm what I said: > [@](#): > > “Dividends also played a big role in stocks’ recovery from the 1929 Crash and subsequent bear market. Consider the stock series constructed by Jeremy Siegel, a finance professor at the Wharton School of the University of Pennsylvania, and author of the classic book ‘Stocks for the Long Run’. He shows that, for all intents and purposes, stocks on a total-return basis in late 1936 and early 1937 had risen back to their September 1929 high, before entering into another bear market. This puts the recovery time at a little more than four years from the stock market’s July 1932 bottom.” Source: [http://www.soundmindinvesting.com/visitor/2008/feb/openline\_1.htm](http://www.soundmindinvesting.com/visitor/2008/feb/openline_1.htm) ---
**Author:** ![Goodle](https://avatars.discourse-cdn.com/v4/letter/g/94ad74/32.png) [@Goodle](https://boards.straightdope.com/u/Goodle)\ **Post date:** [November 24, 2008, 7:02pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/11 "2008-11-24T19:02:37Z")
Google “Andex chart” to see all sorts of indexes (DJIA, S&P) and other measures (inflation, oil prices, etc) for roughly the past 100 years. ---
**Author:** ![Dahu](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dahu/32/3416_2.png) [@Dahu](https://boards.straightdope.com/u/Dahu)\ **Post date:** [November 24, 2008, 10:02pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/12 "2008-11-24T22:02:30Z")
So the indexes don’t include dividends? I was unaware of this. I thought if you invested and the index rises, say, 15% over 5 years and then you sell up, you would have 15% more money. But if the average dividend yield is say 2%, then I would make (approximately) another 10%? Have I got this straight? ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [November 24, 2008, 10:43pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/13 "2008-11-24T22:43:38Z")
> [@Dahu](#): > > So the indexes don’t include dividends? I was unaware of this. I thought if you invested and the index rises, say, 15% over 5 years and then you sell up, you would have 15% more money. But if the average dividend yield is say 2%, then I would make (approximately) another 10%? > > Have I got this straight? Most indexes, including the S&P 500, include dividends that are re-invested. Thus, the return shown is the “total shareholder return”. I’m not sure about the Dow, which has other more glaring weaknesses anyway. Also, when talking about stocks “making money”, you should establish a baseline. To me, a $50 stock that falls and then returns to $50 in 10 years is actually a major loss. You could have invested the money “risk-free” in US Treasuries and made much more than that. At the minimum, the rate of inflation over the time period should be your minimum baseline. Thus, with an average 2% rate of inflation, you’ve only made money if the stock is at least $60.95 in 10 years ($50 \* (1 + .02)^10). ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [November 24, 2008, 11:01pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/14 "2008-11-24T23:01:00Z")
Forgot my main point: there are no guarantees with stock. Let’s say that you are 35 years old and want to retire at 65. You decide to invest your life savings of $1,000 in the S&P 500 or MSCI ACWI index, thinking that you’re pretty much guaranteed that these indexes will be higher 30 years from now. At the very least, you would expect that in 30 years that the index would be able to give you enough to cover inflation at 2% per year. So if the S&P is at 1000 today, you would expect it to be at least $1,811 in 30 years: ($1000 \* (1 +.02)^30). And since this is “guaranteed”, you figure that this 1,811 price could be insured very cheaply. So you decide to buy a “put option” that will give you $1,811 if the market didn’t live up to its guarantee, just in case. How much do you suppose that this insurance would cost you? Based on my calculation, this insurance would cost you at least $400, or 40% of your investment. ---
**Author:** ![Surreal](https://avatars.discourse-cdn.com/v4/letter/s/eada6e/32.png) [@Surreal](https://boards.straightdope.com/u/Surreal)\ **Post date:** [November 29, 2008, 5:17pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/15 "2008-11-29T17:17:50Z")
You don’t need to sort through reams of data to answer this one. OVER THE PAST 10 YEARS, THE U.S. STOCK MARKET HAS RETURNED ~0% (-3% if you adjust for inflation). There have been NUMEROUS 10+ year periods where U.S. stock market investors lost money on an inflation-adjusted basis (1905-1915, 1929-1941, 1966-1982, 1998-2008). If you include foreign stock markets, you will find 40-year periods where investors lost money. ---
**Author:** ![dgrdfd](https://avatars.discourse-cdn.com/v4/letter/d/eb8c5e/32.png) [@dgrdfd](https://boards.straightdope.com/u/dgrdfd)\ **Post date:** [November 30, 2008, 10:38pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/16 "2008-11-30T22:38:46Z")
I posted this on another website and came out with this calculator that appears to be what the OP wanted. Note that it does some modeling so it isn’t accurate for small holding periods. But that’s all detailed in a link from this site: [http://politicalcalculations.blogspot.com/2006/05/sp-500-best-average-and-worst-returns.html](http://politicalcalculations.blogspot.com/2006/05/sp-500-best-average-and-worst-returns.html) ---
**Author:** ![Caldazar](https://avatars.discourse-cdn.com/v4/letter/c/8e8cbc/32.png) [@Caldazar](https://boards.straightdope.com/u/Caldazar)\ **Post date:** [November 30, 2008, 11:49pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/17 "2008-11-30T23:49:59Z")
I pulled out my monthly S&P500 historical data. The following holding period data are for the time period 1/2/1958 - 1/2/2008\*. It compares the adjusted index values on the first trading day of each calendar month with the index values 10, 20, 30, or 40 years later. All return percentages are annualized values. 10-year holding period,481 periods \<0%: 33 periods 0%-4%: 87 periods 4%-7%: 90 periods 7%-10%: 92 periods \>10%: 179 periods 20-year holding period,361 periods \<0%: 0 periods 0%-4%: 70 periods 4%-7%: 95 periods 7%-10%: 108 periods \>10%: 88 periods 30-year holding period,241 periods \<0%: 0 periods 0%-4%: 0 periods 4%-7%: 105 periods 7%-10%: 129 periods \>10%: 7 periods 40-year holding period,121 periods \<0%: 0 periods 0%-4%: 0 periods 4%-7%: 44 periods 7%-10%: 77 periods \>10%: 0 periods \*Note that data from 2008 has not been included. ---
**Author:** ![dgrdfd](https://avatars.discourse-cdn.com/v4/letter/d/eb8c5e/32.png) [@dgrdfd](https://boards.straightdope.com/u/dgrdfd)\ **Post date:** [December 1, 2008, 1:28am UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/18 "2008-12-01T01:28:50Z")
That’s real interesting **Caldazar**. 33 out of 481 (~7%) of the ten year periods have had negative returns (and that doesn’t even include inflation). Even a decade isn’t long enough in some cases. And according to the site I linked to above that includes data from 1871 indicates that a ten year period has had a negative 5.6% return. I wish it would tell me what year/month combo that was. ---
**Author:** ![Dahu](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dahu/32/3416_2.png) [@Dahu](https://boards.straightdope.com/u/Dahu)\ **Post date:** [December 2, 2008, 1:00pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/19 "2008-12-02T13:00:03Z")
> [@Jackknifed\_Juggernaut](#): > > Most indexes, including the S&P 500, include dividends that are re-invested. Thus, the return shown is the “total shareholder return”. I’m not sure about the Dow, which has other more glaring weaknesses anyway. Are you sure about this? Wikipedia seems to indicate otherwise: > **[Total return index](https://en.wikipedia.org/wiki/Total_return_index)** > > A total return index is an index that measures the performance of a group of components by assuming that all cash distributions are reinvested, in addition to tracking the components' price movements. While it is common to refer to equity based indices, there are also total return indices for bonds and commodities. > A total return index (TRI) is different from a price return index. A price return index only considers price movements (capital gains or losses) of the securities that make up the ind... Quote: In equity market, the popular quoted indices, for example S&P 500, are usually price level indices. See Stock market index. The total return index is the price level index plus the dividend reinvested. An example would be the German blue chip index DAX. ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [December 2, 2008, 2:49pm UTC](https://boards.straightdope.com/t/question-about-stock-market/474131/20 "2008-12-02T14:49:58Z")
> [@Dahu](#): > > Are you sure about this? Wikipedia seems to indicate otherwise: > > [Total return index - Wikipedia](http://en.wikipedia.org/wiki/Total_return_index) > > Quote: > In equity market, the popular quoted indices, for example S&P 500, are usually price level indices. See Stock market index. The total return index is the price level index plus the dividend reinvested. An example would be the German blue chip index DAX. You’re right. In practice, I only work with the “total return calculation” of the S&P index, which includes indexed dividends. I didn’t realize that index itself did not include them. This site provides a good explanation: [http://www.cftech.com/BrainBank/FINANCE/SandPIndexCalc.html](http://www.cftech.com/BrainBank/FINANCE/SandPIndexCalc.html) [Next page](https://boards.straightdope.com/t/question-about-stock-market/474131.md?page=2)