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
. 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
. 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.