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I want to see the future
Old 06-13-2007, 07:20 PM   #1
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I want to see the future

Where would you go to get the answer to these questions regarding money in the total market (or S&P 500) today, dividends reinvested, and left alone for 5 years based on historic returns:

What was the worst total return over 5 consecutive yrs?
What was the best total return over 5 consecutive yrs?
What was the average total return over 5 consecutive yrs?
What is the probability the investment will actually have lost real value after 5 yrs?

I hear such numbers thrown around, but don't know where to get or verify them. In my case it's good stuff to know, since my FIRE plan includes letting my nest egg sit for 5 years untouched while I go part-time and eat what I kill.

Feel free to provide answers, but I'd also love to know where you got them.
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Old 06-13-2007, 07:26 PM   #2
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the chart above is from the website AllFinancialMatters Blog Archive S&P 500 Rolling Period Total Real Returns

It looks like The worst 5-year returns were on the order of -35-40% (based on my Mark I eyeball pick) during the depression and during the 70's malaise.

The best return was on the order of 220% during the late 90's.

The average total return over the 5 year spans should be the average total return of the S&P500 which is on the order of 11-12% (or ~8-9 % after inflation).

Counting from the chart there were 19 5-year periods which lost money out of 77 total. Therefore the S&P lost money (using total return) 19/77 ==> around 25% of the time (including dividends and after inflation effects are accounted for).

Now do I get a balloon or something ?
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Old 06-13-2007, 07:28 PM   #3
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Have you looked at
Bogleheads :: View Forum - Investing and Personal Finance

The folks there are throwing around that kind of data all the time.
See for example:
Bogleheads :: View topic - Spreadsheet for backtesting (includes TrevH's data)
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Old 06-13-2007, 07:54 PM   #4
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In my mind, since our retirement spans periods much greater than 5 years the longer period chart from the same source is more interesting.

note that over 20 year spans the market never loses money, however over spans like the 70's malaise and over the depression there is hardly any real growth. That's where the 4% SWR comes in. It's to rescue you during hard times. From other sources if you were to be lucky and retire into a growing market then your SWR can be significantly higher. Based on luck (from other references) you may be able to extract as much as 8-10 percent (or even more) safely from your nestegg if you retire just as the markets are taking off.

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Old 06-13-2007, 08:05 PM   #5
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Now do I get a balloon or something ?
I'm impressed big time. No balloon, but... wow. Thanks.
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Old 06-13-2007, 08:10 PM   #6
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There is an entire book-Triumph of the Optimists- devoted to this and similar questions. Authors are a group of British academics. THE lead author is Elroy Dimson.

Ha
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Thanks for the mention
Old 06-13-2007, 09:45 PM   #7
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Thanks for the mention

Thanks for the links.

For those of you checking out this information, you might be interested in two posts I did a couple of months ago:

S&P 500 Fun Facts

and...

More S&P 500 Index Stats

The last post actually has several PDFs of information I used when putting the post together.
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Old 06-13-2007, 10:26 PM   #8
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What a great perspective of the stock market! Thanks.
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Old 06-14-2007, 11:49 PM   #9
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What a great perspective of the stock market! Thanks.
OK so when do we sell? The years have been saying to sell since 2004. Yet we have all gained big time since then.

The pessimists are being killed by the markets!
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Old 06-15-2007, 05:18 AM   #10
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Sell now? SP500 index is barely at the same level it was 7 years ago.
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Old 06-15-2007, 05:08 PM   #11
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In my case it's good stuff to know, since my FIRE plan includes letting my nest egg sit for 5 years untouched while I go part-time and eat what I kill.
I can only be a bit concerned when a doctor makes this kind of a statement.
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Old 06-15-2007, 05:23 PM   #12
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I can only be a bit concerned when a doctor makes this kind of a statement.
Hey, we each have our own definition of LBYM.
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Old 06-15-2007, 05:28 PM   #13
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... my FIRE plan includes letting my nest egg sit for 5 years untouched while I go part-time and eat what I kill.
Uh...Doc, you don't happen to have a thing for "some fava beans and a nice chianti" do you?
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Old 06-15-2007, 05:35 PM   #14
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Uh...Doc, you don't happen to have a thing for "some fava beans and a nice chianti" do you?


There's a joke in here somewhere about burying my mistakes, isn't there?
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Old 06-15-2007, 05:41 PM   #15
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There's a joke in here somewhere about burying my mistakes, isn't there?
I was expecting your comeback to be along the lines of the Undertaker's Oath: "I'll be the last one to let you down."
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