Over short time periods, an S&P 500 Index fund can deliver exceptionally high returns or exceptionally low returns, depending on the time period you are invested. The chart above looks at the one-, thee-, five-, ten-, fifteen-, and twenty-year rolling index returns of the S&P 500 Index over the time period of January 1973 through December 2016. The worst one-year rolling time frame delivered a return of -43%, which occurred over the twelve months ending in February 2009. The best one-year index return delivered a 61% return, which occurred over the twelve months ending in June 1983. If you were a long-term investor, the worst twenty years delivered a return of 6.4% a year, which occurred over the twenty years ending in May 1979. The best twenty years delivered an average return of 18% per year, which occurred over the twenty years ending in March 2000. The chart above looks at rolling one-year returns of the S&P 500 Index and three different bond indices from January 1973 through December 2016, and Russell 2000 Index returns from January 1979 through December 2016 (The Russell 2000 Index tracks the performance of small cap stocks, and data is not available prior to January 1979.) The Russell 2000 Index, on the far right, delivered its worst one-year return of -42% over the twelve months ending in February 2009. It’s best one-year return of 97% occurred over the twelve months ending in June 1983. Compare that to the best 12-months for intermediate bonds where they were up 27.9%, and the worst where they were down 1.7%. This is a much narrower range of outcomes than what you see with stocks. The chart above looks at rolling three-year returns of S&P 500 Index and three different bond indices from January 1973 through December 2016, and Russell 2000 Index returns from January 1979 through December 2016. Long-term government bonds, shown in orange, delivered their worst three-year return of -6% a year over the three years ending in September 1981. Their best three-year return of 25% occurred over the three years ending in August 1986. The S&P 500 Index, shown in bright red, delivered its worst five-year return of -6.6% a year over the five years ending in February 2009. The best five-year return of 30% occurred over the five years ending in July 1987. The chart above looks at rolling ten-year returns of S&P 500 Index and three different bond indices from January 1973 through December 2016, and Russell 2000 Index returns from January 1979 through December 2016. The S&P 500 Index, shown in bright red, delivered its worst ten-year return of -3% a year over the ten years ending in February 2009. The best ten-year return, of 20% a year, occurred over the ten years ending in August 2000. The chart above looks at rolling fifteen-year returns of S&P 500 Index and three different bond indices from January 1973 through December 2016, and Russell 2000 Index returns from January 1979 through December 2016. The S&P 500 Index, shown in bright red, delivered its worst fifteen-year return of 3.7% a year over the fifteen years ending in August 2015. The best fifteen-year return of 20% a year occurred over the fifteen years ending in July 1997. The chart above looks at rolling twenty-year returns from January 1979 – December 2016. The S&P 500 Index, shown in bright red, delivered its worst twenty-year return of 6.4% a year over the twenty years ending in May 1979. The best twenty-year return of 18% a year occurred over the twenty years ending in March 2000. One thing to be cautious about when studying this data; historical bond returns look pretty decent! Much of that was due to a decreasing interest rate environment. If interest rates gradually climb back over the next decade, bond index returns won’t look great.
