Is it wise to invest S&P 500 in long term?
Ever since the S&P 500 index was devised, it has built an impeccable track record of earning positive returns over time. In fact, research shows it's actually harder to lose money with the S&P 500 than it is to make money if you keep a long-term outlook.
Investing in an S&P 500 fund can instantly diversify your portfolio and is generally considered less risky. S&P 500 index funds or ETFs will track the performance of the S&P 500, which means when the S&P 500 does well, your investment will, too. (The opposite is also true, of course.)
According to our calculations, a $1000 investment made in February 2014 would be worth $5,971.20, or a gain of 497.12%, as of February 5, 2024, and this return excludes dividends but includes price increases. Compare this to the S&P 500's rally of 178.17% and gold's return of 55.50% over the same time frame.
Analysts expect overall S&P 500 earnings to rise 9.5% in 2024 after increasing around 4% in 2023, LSEG data showed.
Warren Buffett recommends an S&P 500 index fund more than any other investment for most people. There's no value in trying to time the market and wait for another correction before putting money into an index fund.
In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500, then you would be sitting on a cool $1.2 million today.
Returns in the S&P 500 over the coming decade are more likely to be in the 3%-6% range, as multiples and margins are unlikely to expand, leaving sales growth, buybacks, and dividends as the main drivers of appreciation.
And for a 20-year investment, returns have been 100% positive. But given the possibility for short-term stock market volatility, you should only invest in an S&P 500 index fund if you don't expect that you'll need your money for around five years.
The S&P 500 is all US-domiciled companies that over the last ~40 years have accounted for ~50% of all global stocks. By just owning the S&P 500 you miss out on almost half of the global opportunity set which is another ~10,000 public companies.
If you invest $10,000 today at 10% interest, how much will you have in 10 years? Summary: The future value of the investment of $10000 after 10 years at 10% will be $ 25940.
How much will the S&P 500 be worth in 2030?
After a spectacular 2023, stocks are off to the races again in 2024. YTD, the Dow is up 2.72%, the S&P is up 7.28%, and the Nasdaq is up 6.41%. (And that's on top of last year's 13.7%, 24.2%, and 43.4% respectively.)
S&P 500 YEAR-END FORECAST YET. Both Capital Economics and Yardeni Research have recently floated similar scenarios. Yardeni Research president Ed Yardeni has a 5,400 target for the end of 2024 but sees the benchmark hitting 6,000 in 2025 and 6,500 in 2026.
Ever since the S&P 500 index was devised, it has built an impeccable track record of earning positive returns over time. In fact, research shows it's actually harder to lose money with the S&P 500 than it is to make money if you keep a long-term outlook.
The S&P 500 carries market risk, as its value fluctuates with overall market performance, as well as the performance of heavily weighted stocks and sectors. For example, the technology sector performed poorly in 2022 and was a large contributor to the index's correction that year.
| Up Months | Worst Months | |
|---|---|---|
| S&P 500 | February March, April, May, July, August, October, November, December | June, September |
| Nasdaq 100 | January, March, April, May, July, August, October, November, December | February, June, September |
The result is the number of years, approximately, it'll take for your money to double. For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.
| Total Return % | 1-Day | 10-Year |
|---|---|---|
| Total Return % (NAV) | -0.72 | 12.64 |
| Category (NAV) | -0.75 | 11.23 |
| Index (NAV) | -0.72 | 12.48 |
| Quartile Rank |
The value of the $1 million today is the value of $1 million discounted at the inflation rate of 3.2% for 40 years, i.e., 1 , 000 , 000 ( 1 + 3.2 % ) 40 = 283 , 669.15.
Consider if an investor put their money in the S&P 500. Historically, it has averaged 11.5% returns between 1928 and 2022. In 6.4 years, their money would double, assuming these average returns.
Is the S&P 500 good for long term growth?
The S&P 500 Index is considered a gauge of the U.S. economy. It is a broad-based measure of large corporations traded on U.S. stock markets. Passively holding the index over longer periods of time often produces better results than actively trading or picking single stocks.
Wall Street analysts' consensus estimates predict 3.6% earnings growth and 3.5% revenue growth for S&P 500 companies in the first quarter. Analysts project full-year S&P 500 earnings growth of 11.0% in 2024, but analysts are more optimistic about some market sectors than others.
If the S&P 500 outperforms its historical average and generates, say, a 12% annual return, you would reach $1 million in 26 years by investing $500 a month.
The key to keeping your money safe
The index itself has a long history of earning positive returns over time and recovering from downturns. While there are never any guarantees when it comes to investing, opting for an S&P 500 index fund or ETF is about as close to guaranteed long-term returns as you can get.
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
