Annualized Returns

[JWR1945]

10-Year Annualized Returns

When people talk about stock market returns, there is an ambiguity as to whether one is using real (i.e., adjusted for inflation) or nominal dollar amounts and as to whether dividends are reinvested. Optimists like to quote nominal returns. Pessimists tend to ignore dividends.

Here are the 10-year nominal and real annualized returns of the S&P500. I have used my JanSz-Chips Deluxe Version 1.0B modification of Version 1.61 of intercst's Retire Early Safe Withdrawal Calculator of November 7, 2002. Intercst has made my modified version available for downloading from his website: http://www.retireearlyhomepage.com/jwr1945.html
It is also available in the special SWR Research section of www.nofeeboards.com .

Results with the Retire Early Safe Withdrawal Calculator

If you already have the Retire Early Safe Withdrawal Calculator, you can get much of this information right away. Simply put in an initial balance of $1000, a 100% stock allocation, 0.000% withdrawal rate and 0.00% in expenses. You can choose whether to use the CPI or the PPI for the inflation rate. You do not have to restrict yourself to looking at January numbers. You can select any month. [With a 100% stock allocation, it does not matter whether you choose to rebalance your portfolio.]

Simply scroll over to columns S through AK. You can read the 10-year, 20-year, 30-year, 40-year, 50-year and 60-year nominal and real (after adjusting for inflation) balances. They are in rows 15 through 144. Just remember that years 2003-2010 have dummy input data for stock returns and inflation. Stop at 1992 for 10-year balances, 1982 for 20-year balances and so forth.

The numbers that you read are with all dividends are reinvested. Look at columns S, T and V. Looking at the 10-year data (from 1871-1992), the only time that the nominal balance fell was after the decade that began in 1929. Looking at inflation adjusted (real) balances, you would have lost buying power after the first decade that began in 1909, 1910, 1911, 1912, 1965, 1966, 1967, 1968, 1969, 1970, 1971, 1972 and 1973. [The decade that began in 1937 remained unchanged. It started at $1000 and ended at $1000.] The deflation of the Great Deflation caused the buying power of a 1929 portfolio to increase. The inflation of the late 1960s and the 1970s was hard on all investors. Inflation was the culprit in 1909-1912 as well.

If we include 0.20% in expenses, the story remains the same except that the buying power decreases in the decade following 1937.

continued

[JWR1945]

Results taken from the JanSz-Chips Deluxe Version 1.0B

My modified calculator has special data reduction sections starting in rows 2600 through 3400. I have listed the nominal and real, annualized percentage returns with all dividends reinvested below.
S&P500 returns with dividends reinvested and 0.00% expenses.

   
Year   Nominal   Real
1871   9.58    12.69 
1872   8.18    10.56 
1873   7.44    10.26 
1874   7.13    10.32 
1875   5.42    8.95 
1876   7.46    10.79 
1877   10.04    13.55 
1878   10.32    11.40 
1879   9.09    9.48 
1880   5.68    8.59 
1881   2.73    4.68 
1882   4.32    7.81 
1883   4.57    7.05 
1884   3.08    6.19 
1885   4.62    7.07 
1886   2.62    4.51 
1887   1.84    4.01 
1888   3.67    6.07 
1889   5.93    7.73 
1890   5.65    5.26 
1891   8.21    8.35 
1892   8.30    7.49 
1893   8.50    7.51 
1894   8.69    6.65 
1895   11.21    8.42 
1896   12.76    10.09 
1897   12.54    9.07 
1898   7.85    5.06 
1899   8.58    5.57 
1900   9.75    7.30 
1901   7.42    5.51 
1902   5.96    4.43 
1903   5.86    4.56 
1904   7.23    5.22 
1905   3.93    2.11 
1906   4.68    2.55 
1907   5.42    2.52 
1908   6.30    1.31 
1909   4.58    (1.63)
1910   4.83    (1.94)
1911   3.77    (3.46)
1912   4.30    (1.92)
1913   6.15    0.58 
1914   7.16    1.45 
1915   10.15    4.38 
1916   9.71    3.91 
1917   9.97    5.63 
1918   15.23    12.82 
1919   17.84    17.42 
1920   14.88    16.27

 
1921   13.78    15.83 
1922   7.45    9.26 
1923   4.03    6.82 
1924   7.99    10.95 
1925   4.81    7.36 
1926   6.94    9.75 
1927   8.79    11.17 
1928   2.05    4.08 
1929   (0.34)   1.67 
1930   0.86    2.97 
1931   2.34    3.57 
1932   6.60    5.61 
1933   9.32    6.41 
1934   6.94    4.02 
1935   9.60    6.69 
1936   8.49    5.53 
1937   4.31    (0.00)
1938   8.23    2.83 
1939   7.76    2.11 
1940   9.07    3.49 
1941   13.11    6.65 
1942   16.08    10.16 
1943   15.56    10.44 
1944   13.56    8.72 
1945   15.80    11.20 
1946   14.97    10.61 
1947   17.07    14.18 
1948   16.09    13.93 
1949   18.81    16.59 
1950   17.85    15.28 
1951   15.25    13.42 
1952   15.13    13.71 
1953   13.38    11.87 
1954   15.17    13.59 
1955   12.65    10.91 
1956   11.11    9.22 
1957   9.69    7.78 
1958   11.89    9.94 
1959   9.38    7.16 
1960   7.69    4.98 
1961   7.76    4.69 
1962   7.29    3.96 
1963   9.29    5.66 
1964   5.50    1.26 
1965   1.76    (3.33)
1966   3.91    (1.73)
1967   5.68    (0.23)
1968   3.31    (2.76)
1969   3.79    (2.76)
1970   6.25    (1.15)
1971   7.90    (0.22)
1972   5.87    (2.57)
1973   6.78    (1.73)
1974   10.53    2.21 
1975   13.78    6.03 
1976   12.73    5.33 
1977   14.53    7.40 
1978   15.26    8.38 
1979   15.44    9.01 
1980   16.02    10.44 
1981   13.44    8.59 
1982   17.26    12.87 
1983   15.25    10.98 
1984   14.42    10.37 
1985   13.73    9.78 
1986   14.54    10.68 
1987   14.23    10.21 
1988   17.23    13.38 
1989   18.52    14.96 
1990   17.81    14.55 
1991   17.26    14.29 
1992   12.55    9.78

continued

[JWR1945]

The modified calculator allows us to see what happens if none of the dividends were reinvested. We put 0% into cell B22. [You can look at partially reinvesting dividends as well.] I have listed the nominal and real, annualized percentage returns with none of the dividends reinvested below.

S&P500 returns with dividends stripped off with 0.00% expenses.

 * * *
Year * * *Nominal * * *Real
1871 * * *3.38 * * *6.31 
1872 * * *1.99 * * *4.24 
1873 * * *1.29 * * *3.95 
1874 * * *1.06 * * *4.07 
1875 * * *(0.68) * * *2.65 
1876 * * *1.55 * * *4.70 
1877 * * *4.63 * * *7.96 
1878 * * *5.03 * * *6.06 
1879 * * *3.88 * * *4.25 
1880 * * *0.52 * * *3.29 
1881 * * *(2.43) * * *(0.57)
1882 * * *(0.72) * * *2.61 
1883 * * *(0.35) * * *2.02 
1884 * * *(1.80) * * *1.17 
1885 * * *0.02 * * *2.37 
1886 * * *(1.95) * * *(0.15)
1887 * * *(2.75) * * *(0.68)
1888 * * *(0.84) * * *1.45 
1889 * * *1.50 * * *3.22 
1890 * * *1.26 * * *0.89 
1891 * * *3.86 * * *3.99 
1892 * * *3.95 * * *3.18 
1893 * * *4.19 * * *3.24 
1894 * * *4.46 * * *2.50 
1895 * * *7.09 * * *4.40 
1896 * * *8.74 * * *6.16 
1897 * * *8.52 * * *5.18 
1898 * * *3.45 * * *0.77 
1899 * * *4.07 * * *1.19 
1900 * * *5.15 * * *2.81 
1901 * * *2.75 * * *0.91 
1902 * * *1.17 * * *(0.29)
1903 * * *0.95 * * *(0.29)
1904 * * *2.28 * * *0.37 
1905 * * *(1.19) * * *(2.91)
1906 * * *(0.56) * * *(2.58)
1907 * * *0.01 * * *(2.74)
1908 * * *0.51 * * *(4.20)
1909 * * *(1.42) * * *(7.28)
1910 * * *(1.32) * * *(7.69)
1911 * * *(2.62) * * *(9.40)
1912 * * *(2.20) * * *(8.04)
1913 * * *(0.44) * * *(5.66)
1914 * * *0.54 * * *(4.83)
1915 * * *3.53 * * *(1.90)
1916 * * *3.09 * * *(2.36)
1917 * * *3.42 * * *(0.66)
1918 * * *9.29 * * *7.00 
1919 * * *12.22 * * *11.82 
1920 * * *9.41 * * *10.75

 
1921 * * *8.44 * * *10.38 
1922 * * *1.29 * * *3.00 
1923 * * *(2.25) * * *0.37 
1924 * * *1.79 * * *4.58 
1925 * * *(1.32) * * *1.08 
1926 * * *0.84 * * *3.50 
1927 * * *2.76 * * *5.00 
1928 * * *(4.29) * * *(2.38)
1929 * * *(6.64) * * *(4.76)
1930 * * *(5.52) * * *(3.55)
1931 * * *(4.07) * * *(2.91)
1932 * * *0.73 * * *(0.20)
1933 * * *3.59 * * *0.83 
1934 * * *1.18 * * *(1.58)
1935 * * *3.83 * * *1.08 
1936 * * *2.73 * * *(0.07)
1937 * * *(1.44) * * *(5.51)
1938 * * *2.75 * * *(2.38)
1939 * * *2.08 * * *(3.27)
1940 * * *3.22 * * *(2.06)
1941 * * *7.23 * * *1.10 
1942 * * *10.48 * * *4.84 
1943 * * *10.00 * * *5.13 
1944 * * *7.95 * * *3.35 
1945 * * *10.19 * * *5.81 
1946 * * *9.37 * * *5.22 
1947 * * *11.56 * * *8.81 
1948 * * *10.74 * * *8.67 
1949 * * *13.73 * * *11.60 
1950 * * *13.14 * * *10.67 
1951 * * *10.91 * * *9.15 
1952 * * *11.06 * * *9.69 
1953 * * *9.53 * * *8.08 
1954 * * *11.62 * * *10.09 
1955 * * *9.24 * * *7.55 
1956 * * *7.77 * * *5.94 
1957 * * *6.40 * * *4.54 
1958 * * *8.74 * * *6.84 
1959 * * *6.25 * * *4.10 
1960 * * *4.52 * * *1.89 
1961 * * *4.58 * * *1.60 
1962 * * *4.11 * * *0.88 
1963 * * *6.17 * * *2.65 
1964 * * *2.31 * * *(1.80)
1965 * * *(1.70) * * *(6.61)
1966 * * *0.37 * * *(5.08)
1967 * * *2.08 * * *(3.63)
1968 * * *(0.52) * * *(6.36)
1969 * * *(0.23) * * *(6.52)
1970 * * *2.08 * * *(5.03)
1971 * * *3.59 * * *(4.20)
1972 * * *1.28 * * *(6.79)
1973 * * *2.00 * * *(6.14)
1974 * * *5.64 * * *(2.31)
1975 * * *8.99 * * *1.56 
1976 * * *7.95 * * *0.87 
1977 * * *9.81 * * *2.97 
1978 * * *10.75 * * *4.13 
1979 * * *11.09 * * *4.91 
1980 * * *11.85 * * *6.47 
1981 * * *9.36 * * *4.69 
1982 * * *13.50 * * *9.25 
1983 * * *11.67 * * *7.54 
1984 * * *11.01 * * *7.08 
1985 * * *10.49 * * *6.65 
1986 * * *11.43 * * *7.67 
1987 * * *11.22 * * *7.31 
1988 * * *14.42 * * *10.66 
1989 * * *15.91 * * *12.42 
1990 * * *15.41 * * *12.22 
1991 * * *15.16 * * *12.24 
1992 * * *10.61 * * *7.89

The previous numbers assume that expenses are 0.00%. To find an annualized return with expenses, subtract the expense ratio from the percentage annualized return. [This makes an excellent approximation. The precise calculation has the form (1+r2) = (1+r1)*(1-expenses).]

Have fun.

John R.

[Tommy_Dolitte]

This is excellent work.

...Could serve as good platform to investigate what was going on in years of strong and poor performance.

Stephen Leeb has such a chart in his book "The Oil Factor"...which showed inverse relationships between major stock indices (despite solid earnings).

Let's chat on this some more.

TD