S&P 500’s worst decade ever
According to a recent article in The New York Times, the inflation-adjusted S&P 500 has never seen a 10-year period as bad as the one that ended last month.
Even after reinvesting the dividends, S&P 500 investors would have ended up losing about 5.1% a year – worse than the 4.3% compounded annual loss in the period ending in September 1974 and the 2.8% deflation-adjusted annual loss in the 1930s:
One eye opener is that the total loss over the most recent 10-year period (January 1999 – January 2009) is 23.5% without adjusting for inflation. Once adjusted, the loss jumps to a whopping 40.4%, which shows how important choosing stocks with growing dividends can be.
Speaking of which, the SmartMoney article I cited in a previous post points out that the S&P 500 lost 9% over the last decade, including reinvested dividends, while the S&P 500 Dividend Aristocrats as a group gained 44%. Obviously there’s some discrepancy between The New York Times and SmartMoney’s calculations of the S&P 500’s most-recent 10-year loss – 23.5% and 9%, respectively, with dividends reinvested – but the key takeaway once again has to be how investing in dividend-growth stocks can help reduce market risk and increase return.
