Historical Returns Of The S&P 500

the S&P 500 Index is arguably the most widely-followed U.S. stock market index. The S&P 500 Index is a market cap-weighted index of U.S. equities of 500 large companies. The Standard and Poors 500 index is typically used as a great illustration of how the stock market is performing as a whole since there are a multitude of companies and industries represented.

However, being the history buff that I am, I am always curious how stock market indices have performed in the past. In this article, we will explore the true market returns, along with the market returns when taking divident reinvestment into consideration.

Total Return of the S&P 500 Including Dividends

According to Standard & Poor’s, the dividends were responsible for 44% of the total return over the last 80 years of the S&P 500 index. To make a relatively competent comparison, it is vital that we include this data. It is interesting to graph and average the total return (the increase in stock market value if all dividends were reinvested) instead of just the rise in securities values over time. The following graph shows the total return of the S&P 500 index since 1950:
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Standard & Poor’s introduced its first stock market index in 1923 and created the S&P 500 Index in 1957. Prior to 1957, Standard & Poor’s utilized a different index, the S&P 90 Index, that tracked performance of large company stocks. Accordingly, market returns for the S&P 500 Index and it predecessor index are available going back to the 1920s.

The Chart Below shows how the S&P 500 Index has performed over the past 35 years. Surprisingly enough, the good years tremendously outweigh the bad ones. This is probably due to the fact that we are so far off of the historical highs currently!

Year over Year Stock Market Returns