You can use this Historical Investment Calculator to compare investment returns for multiple asset classes. The calculator includes historical price data for 14 popular indices with some prices going back over 100 years. The calculator will compare nominal returns or inflation-adjusted returns. Inflation adjustments are made using U.S. Consumer Price Index data.
Why look at historical investment returns?
The answer is not what you may think.
A category of traders known as chartists, use historical stock returns and charts to predict future price movements.
While you could perhaps use this historical returns calculator to assist with predications, there are certainly better tools you should use.
Rather than being a tool for traders, this historical investment calculator is a tool for long term investors. It is designed to give the user a 30,000-foot view of investing. I created it particularly for:
- the millennial generation (to which my three children belong) and Gen Z, and
- bloggers, parents, or anyone who wants to teach or learn about the benefits of long term investing.
According to an Ally Financial survey as quoted by Andrea Coombes in Forbes 66% of people aged 18 to 29 (and 65% of those 30 to 39) say investing in the stock market is scary or intimidating.
That's because, I believe, the Millennials and Gen Z do not have enough life experience to take the long view. They were starting to come of age when the Great Recession hit. Many saw first hand the impact it had on their parent's finances. Some saw their college fund go poof. Others saw their parents or their neighbors lose their home. Some saw both.
Recessions can unquestionably be scary things to live through.
But take a look at what this calculator teaches us. Recessions are but blips for the investor. In fact, we can look at history and see that not investing should make us more scared than investing.
Long term investing, it turns out, is pretty dull. Before starting the coding for this calculator a few months ago, I had been thinking about its design and what it might teach us.
I assumed that we would learn that one particular investment is better than another investment if interest rates are rising.
Or that a different investment would be warranted if rates were falling.
While that may be true over the short to medium term, the Historical Investment Calculator demonstrates (I think conclusively) that the practice of investing is what is essential for security and prosperity. That is, investing itself, and not so much what you invest in, determines one's future. More below
Using the Historical Returns Calculator
The user can compare investment returns for similar or different asset classes.
Pick any three indices from a total of 13, or, as a proxy for cash, select the 3-Month US T-Bill. There are nine equity stock market indices from which to pick. Plus there are two commodity indices (gold, wheat), one real estate index (Case-Shiller) and one fixed income index (ICE's Bank of America US Corporate AAA Index).
I have included the year-end closing value for all indices going as far back as possible. Each index originated at different times. Thus the year for which an analysis can start varies from index to index. For some, such as the DAX 30 or the Shanghai Composite, data is not available before 1991. On the other extreme, the Dow Jones Industrial Average data goes back to 1915. Here's the initial year for all indices:
|Cash - US 3-Month T-Bill Proxy||1933|
|CAC 40 Index||1991|
|DAX 30 Index||1991|
|Dow Jones Industrial Average||1915|
|FTSE 100 - Financial Times Stock Exchange 100 Index||1969|
|Gold - Fixing Price 10:30 A.M. (London time)||1968|
|Hang Seng Composite Index||1987|
|ICE BofAML US Corporate AAA Index||1988|
|S&P 500 Index||1928|
|Shanghai Composite Index||1991|
As mentioned, you can compare the returns for up to 3 assets at a time. The calculator places few restrictions on what a user can do. However, it probably does not make much sense to do a comparative analysis that starts before the first data of the index with the least amount of data points (years).
For example, the calculator will let you compare the return on the Dow with that of gold from 1915 to 2000, but why would you? If you are calculating absolute returns, that will give the Dow an unfair advantage since the calculator does not know the price of gold before year-end 1968.
Two investment modes
The calculator supports either a repeated series of investments (the default) or a single investment. When you select "No" for "One-time investment", the calculator assumes a repeated investment as of the last day of each year.
For example, the "No" selection allows you to answer this question:
What would have been my annualized return-on-investment (ROI) and my investment's final value had I invested $5,000 each year in gold between 1980 and 2000?
On the other hand, the "Yes" selection allows you to answer this question:
What would have been my ROI and the investment's final value had I made a one-time $10,000 investment in AAA corporate bonds in 1990 and then sold them in 2010?
Adjust for inflation
There are nominal returns, and then there are real returns.
By default, the calculator shows nominal returns, i.e., not adjusted for inflation. It is more fun to look at nominal returns. Nominal returns show the gross profit. Buy something for $1,000 and sell it three years later for $1,350, the nominal gain is $350.
But nominal returns do not represent real-world results. They do not account for the inflation tax. Therefore, it is better to evaluate real performance, i.e., inflation-adjusted returns. The Historical Investment Returns Calculator has an option for an inflation-adjusted calculation.
The calculator adjusts for inflation using the U.S. Consumer Price Index's year-over-year (December to December) rate of change. If the investment index had a nominal increase of 5.5% between two years while the CPI increased by 2%, the calculator would show a real investment gain of 3.5%.
Further, the last year selected is always the base year from where the inflation calculation starts. That is, if you choose a date range from 2012 to 2022, then the year 2022 is the base year. That means, $1 equals $1. There is no adjustment for the final year.
There is a practical benefit for making the final year of the date range the base year. Everyone has a better understanding of the value of the dollar the closer a year is to the present. We know what the dollar was able to buy in 2022. And the net result is, due to inflation, the dollar buys LESS in the initial and subsequent years than it would have when there is no adjustment.
Let's look at an example to make this clear.
First, without an adjustment for inflation, if you had made a one-time investment of $10,000 in the S&P 500 at the end of 2012, it would be valued at nearly $27,000 ($17,000 gain) as of the end of 2022. The annualized rate-of-return is 10.4%.
Twenty-seven thousand dollars is the numerical value of the investment. But, as we have discussed, the dollar in 2022 does not have the same purchasing power as in 2012.
Therefore, we adjust for inflation.
Once we do that, the market value drops from just under $27,000 to about $21,000.
What does this mean?
It means the gain on the investment will purchase about $13,500 of new stuff and not $17,700. The difference of about $4,200 is the amount required to stay even with inflation, or $14,200 ($10,000 + $4,200) will buy the same basket of goods in 2022 as what $10,000 bought in 2012.
Or to state it another way, the real investment gain (or real new purchasing power) is 13,500, not $17,700 or expressed as a ROR, 8.9%.
The Historical Chart and the Logarithmic Scale
A chart drawn on a logarithmic scale, it gives a more accurate visual indication of relative performance. Below are two examples.
Look at figure 3 and the green Nasdaq line. From the initial investment of $10,000 until the time it is valued at $100,000 represents a 10-fold increase in value. Yet, the change is barely visible in the chart.
Now move to the right. Look at the change in value starting in about 2016, when our investment in the Nasdaq is worth approximately $1,000,000 until the value is amount $1,500,000. The move is only a 50% change in value, but the chart represents it as a significant move.
Now, look at the same Nasdaq investment in the chart in Figure 4. This chart uses a logarithmic scale, and it gives the investor a much more accurate representation of the investment return.
The chart clearly shows the first 10x gain to $100,000. The 1.5x gain starting around 2016 is barely noticeable.
If you want to learn more about charting using a logarithmic scale, see Naomi Robbins' column on forbes.com, When Should I Use Logarithmic Scales in My Charts and Graphs?
Real Estate is a Particular Case
Do you own a home?
Would you like to know if your home's value has kept up with real estate values in the U.S.?
The Historical Investment Returns Calculator includes year-end values for S&P CoreLogic Case-Shiller Home Price Index. You can, therefore, assess your home's change in value relative to the real estate industry's commonly used price index.
To do this, you'll need to enter the price of your home as the amount invested and select the one-time investment option.
If your home's current value is equal to the ending value, then your home's value has mirrored the Case-Shiller national average.
However, the annualized rate-of-return (ROR) shown will not be your property's ROR if you have a mortgage. Your mortgage payments include interest charges which this calculator does not consider.
If you want a more thorough analysis of your real estate investment including your ROR, then see my Mortgage Calculator on this site.