In general, when people say “the stock market,” they mean the S&P 500 index. The S&P 500 is a collection referred to as a stock market index of just over 500 of the largest publicly traded U.S. companies. The list is updated every quarter with major changes annually. While there are thousands more stocks trading on U.S. stock exchanges, the S&P 500 comprises about 80% of the entire stock market value on its own. Making it a useful proxy for the performance of the stock market as a whole.
The average returns from 2012-2021 were 14.8% annually for the S&P 500 Index. The market’s results from one year to the next can vary significantly from the average. You can’t invest in the S&P 500 directly because it is a stock market index; not an individual stock or fund you can buy. However, you can purchase the stock of S&P Global (SPGI), the company that maintains the index. You can also purchase one of every stock listed on the S&P 500, but you’ll need quite a bit of capital to do so. It might cost around $3,000 to purchase only one of each of the top 10 stocks on the index.
Getting Clarity
Standard & Poor’s 500 Index (S&P 500) is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. While it assumed its present size and name in 1957, the S&P dates back to the 1920s, becoming a fused index tracking 90 stocks in 1926. The average annualized return since its inception in 1928 through Dec. 31, 2021, is 11.82%.The average annualized return since adopting 500 stocks into the index in 1957 through Dec. 31, 2021, is 11.88%. The average annual return (AAR) is the percentage showing the return of a mutual fund in a given period. Meaning, that it measures a fund’s long-term performance. So, it’s an important tool for investors looking into a mutual fund investment.
Inflation is one of the major problems for an investor hoping to recreate that 11.88% average return regularly. Adjusted for inflation, the historical average annual return is only around 8.5%. There is an additional problem brought up by the question of whether that inflation-adjusted average is accurate since the adjustment is made using the inflation figures from the Consumer Price Index (CPI). The index which some analysts believe immensely devalues the true inflation rate.
Another major factor in annual returns for an investor in the S&P 500 is when they choose to enter the market. For example, the SPDR S&P ETF Trust (SPY), which duplicates the index, performed very well for an investor who bought between 1996 and 2000 but experienced a consistent downward trend from 2000 to 2002. Investors who buy during market lows and hold their investment or sell at market highs will experience larger returns than those who buy during market highs, particularly if they sell during dips. Stock purchase timing plays a role in returns, but there are long periods between lows and highs. It is also difficult to know or predict these events.
For those who want to avoid the missed opportunity of selling during market lows but don’t want the risk of active trading, dollar-cost averaging is an option. For most people, the simplest and most affordable option for investing in the S&P 500 is to buy shares of an exchange-traded fund or index fund that mirrors it. A company builds a portfolio of stocks that mirror the S&P 500 index in these instruments. It then securitizes and fractionalizes those stocks, and offers them as shares of a fund you can buy. These funds are often provided at a much lower cost than if you were to buy one of every stock on the index to get similar performance.
More Knowledge
S&P 500 returns calculations do not include dividends. You can find results from some analysts that include dividends. The S&P 500 is the standard for measuring overall stock market returns. There have been many ups and downs in its century of life. But generally, the index has made returns over some time. Since the S&P 500 started it has returned 11.82%.
You can invest in the S&P 500 using index funds and exchange-traded funds that copy the index and not pay as much as you would for each stock. Investing in funds that track the S&P 500 requires time. Many investors have lost everything by panic selling during a dip. If you’re looking for an investment with a long-standing history of good long-term returns, S&P 500 assets might be the right fit for you. To start investing in the S&P 500 you need to open an account with a trustworthy brokerage. These firms can be Vanguard, Fidelity, TD Ameritrade, or Charles Schwab. Modern brokers have easy-to-use online platforms. On these platforms, you can buy and sell most types of investments for a slight cost or no fees.
Summary: S&P Average Return
While it is rare for the stock market to perform significantly lower than the historical return of 10% over a long-term period, such as 10 years, there are such incidences in market history. As you can see when considering any type of investing you must do your research. This valuable information will help you whether you are trying to build a portfolio or get into day trading. I can teach you how to day trade like the top 10% without a complicated strategy or any technical indicators, even if you are a beginner. Day trading involves carefully analyzing the fundamental circumstances and forecasting future movement.
Applying a strategy allows a trader to overcome the probability of losing money. When you involve yourself in financial markets, there is a learning curve in which you will lose money. The risk is inevitable, but I can help you minimize that risk with the MK VIP program. The MK VIP training has plenty of resources to help you get started on reaching your day trading goals. I teach the working class how to earn $10,000 a month through day trading. I help my students avoid the challenges I faced when I first became a day trader; especially when it comes to dealing with risks. As of now, MK Financial LLC is already the #1-day trading coaching business in the US in just one year. You are just a click away from learning what you need to become a day trader with any amount of capital and take your life and salary to the next level.
Learn More
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”
