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  • Guy Drori

S&P500 Statistics

S&P500 is a stock market index that is publish by S&P Dow Jones Indices LLC (*) and tracks the performance of the 500 most largest companies listed on stock exchanges in the United States.

It is one of the most followed equity indices (with Nasdaq and Dow Johns they are the 3 primary indexes for US listing companies).

The companies included in the S&P500 are weighted based on their recent market cap (capitalization-weighted index, also called a market-value-weighted index).

As of Sep 30, 2022 the 9 highest weighted companies in the index are: Apple, Microsoft Corp, Inc, Tesla Inc, Alphabet Inc, Berkshire Hathaway, UnitedHealth Group Inc, Johnson & Johnson, Exxon Mobil Corp.

Below is the sector weighted breakdown, leading by Information Technology (26.4%) and Health Care (15.1%).

To invest in the S&P500 index there are few options, the most common way is to invest in an ETF that designed to track the S&P 500 index. Some examples for such ETF are among others, SPDR S&P 500 ETF Trust (NYSE Arca: SPY) and Vanguard 500 Index Fund (NYSE Arca: VOO).

Lets look into some historical data of the S&P500 annual returns:

In the table below I pulled the Adj. close price for S&P500 (adjusted for splits and dividend and/or capital gain distributions).

The data starts at December 1974 up until mid-October 2022 - 48 years in total.

Out of the 48 years span, 36 years had positive returns and only 12 years showed negative return to investors.

Some observations:

  • The average return for a positive year is ~17% and the average return for a negatives year is ~(12%).

  • Usually there is only one negative year between a serial of positive years, except 2000 till 2002, which had a 3-year string with negative returns to investors.

  • The longest period span with positive returns was during 1982 to 1989. 8 straight years of "green" returns.

  • Out of the 36 positive years, 28 had a double-digit rate of return and only 8 with return lower than 10%.

  • The best year (between 1974 to 2022) to invest in S&P500 was 1995 with a 34% return and the worse year was 2008 with a negative 38% return.

If calculating the average annual rate of return form December 1974 to October 2022 we are getting 8.6% per year!

Those returns are dependent on the entry point and the duration the investor holds the index.

If we were investing in the S&P500 index in Aug 2000, the annual rate of return was only ~2%! same if we were investing in Sep 2007 the annual rate of return would shrink to only ~3.3%.

So, to conclude, it make sense that Warren Buffett has long recommended that investors should put their money in low-cost index funds, which hold every stock in an index, making them automatically diversified.

“Consistently buy an S&P 500 low-cost index fund, keep buying it through thick and thin, and especially through thin.

(*) From Wikipedia: S&P Dow Jones Indices LLC is a joint venture between S&P Global, the CME Group, and News Corp that was announced in 2011 and later launched in 2012. It produces, maintains, licenses, and markets stock market indices as benchmarks and as the basis of investable products, such as exchange-traded funds (ETFs), mutual funds, and structured products. The company currently has employees in 15 cities worldwide, including New York, London, Frankfurt, Singapore, Hong Kong, Sydney, Beijing, and Dubai.

The company's best-known indices are the S&P 500 and the Dow Jones Industrial Average (DJIA), which were created in 1957 and 1896, respectively. The company also manages the oldest index in use, the Dow Jones Transportation Index, created in 1882 by Charles Dow, the founder of The Wall Street Journal.

S&P Global (formerly McGraw Hill Financial, Inc.), owner of Standard & Poor's, controls 73% of the joint venture, CME Group owns 24.4% through its affiliates.

Disclosure: The article should not be considered a recommendation or a substitute for the reader's independent judgment, or an offer or investment marketing or investment advice.


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