Annualized return is ≈10% with a 17% volatility. Three quarters of annual returns were positive.
Let us analyze how the S&P 500 index performed over the last 50 years (1970-2019). This histogram of annual returns shows that the number of years when the index return was negative, between 0-10%, 10-20% or >20%, are roughly equal. Three-quarters of annual returns were positive.
A dollar invested in the market back in 1970 would have grown to $154, assuming the dividends were reinvested and there were no transaction costs. This represents an annualized growth rate of 10.6% CAGR. This real-life scenario exemplifies the message from the blog “Asset Growth Using Rule of 72.”
Here are a few other metrics for the index. The annualized return without dividends is 7.4%. This means that 30% of the S&P 500 return is from dividends. The volatility is high relative to the return and this also causes the CAGR to be lower than the average return.
You can find more information about these financial metrics in “Investment Return and Volatility Explained.”
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