Imagine you had invested $10,000 at the bottom of the financial crisis from 2008 to 2009. The results you find below might not blow you away on an actual basis, but the amount invested is all relative based on your financial situation. It’s the percentage gain that’s more important because that number is going to be the same for everyone—assuming investors poured money into the market at the exact same time in this hypothetical situation.
Below, in addition to looking at how much money you would have made, we’ll also take a brief look to see if the same kind of return is possible over the next 10 years.
The S&P 500 consists of approximately 500 large-cap stocks—it’s never exactly 500 stocks and the makeup tends to change over time—that are either listed on the NYSE or NASDAQ. Most investors and traders refer to the S&P 500 as a barometer for the market because its components represent a lot of the significant activity that occurs on a daily basis. The S&P 500 Index is also the index that is generally used when calculating beta.
The absolute bottom for the financial crisis was March 9, 2009, when the S&P 500 hit 676.53. For simplicity purposes, we’ll call it 676. If you had $10,000 to invest at that time, it would have bought you 148 shares of the SPDR S&P 500 ETF (SPY) at $67.95 (this is rounded up from 147.17 assuming you could have thrown in a few extra bucks). As of October 2020, the S&P 500 stands at 3,477.13 and SPY trades at $346.85.
- 3477.13 – 676 = 2,801.13 for a 414% gain or 3.14x increase
- $346.85 - $67.95 = $278.90 for a 410% gain or 4.10x increase
Thus, holding all of your shares, your investment would be worth $51,333.80. Pretty good for a $10,000 investment. And this doesn’t include the dividend yield, which is always changing, but currently stands at 1.75% for the S&P 500 Index and 1.65% for SPY.
The Dow Jones Industrial Average is intended to track the 30 strongest blue-chip stocks throughout the entire market. Regardless, the DJIA stood at 6,507 on March 9, 2009. A $10,000 investment with the SPDR Dow Jones ETF (DIA) would have bought you 153 shares at $65.51 each. As of October 2020, the DJIA trades at 28,586.90.
- 28,586.90 - 6,507 = 22,079.90 for a 339% gain or 3.39x increase
- $285.93 - $65.51 = $220.42 for a 336% gain or 3.36x increase
Thus, holding all of your shares, your investment would be worth $43,747.29.
The Nasdaq is historically known to track mostly technology stocks. Technology stocks on the Nasdaq vary among tech and biotech with some other company types mixed in as well.
The Nasdaq Composite consists of approximately 4,000 stocks. Whether they’re tech stocks or not, you’re going to find more growth companies in the Nasdaq. This will lead to bigger gains during bull markets and bigger sell-offs during bear markets. On March 9, 2009, the Nasdaq traded at 1,268.64. A $10,000 investment in Fidelity’s Nasdaq Composite ONEQ ETF at $50.75 would have bought you 198 shares. As of October 2020, the NASDAQ trades at 11,579.94.
- 11,579.94 - 1,268 = 10,311.94 for a 813% gain or 8.13x increase
- $449.84 - $50.75 = $399.09 for a 786% or 7.86x increase
Thus, holding all 198 of your shares, your investment would be worth $89,068.32.
Whether you’re bullish or bearish, the odds of the above returns repeating themselves over the next 10 years are not likely. If you believe that the economy is on a steady track, that’s fine and there will still be growth ahead but the odds of returns greater than 300% are not likely. Add in central bank policy, which is increasing base level Treasury rates and causing balance among fixed income and equities in the marketplace, and those expectations are more for steady returns back to historical levels of 8% to 10%.
The Bottom Line
If you were savvy enough to get in at the bottom in 2009, you did well. As such, this gives you a much higher baseline to invest for the future, but don't count on a rerun of the last 10 years. However, for investors willing to maintain the risk of their S&P 500, Dow Jones, or Nasdaq investments, steady returns of a more historical average nature could still lead to substantial gains.