We include dividend reinvestment in our calculations.
Although most financial media sources will list 11.74% as the S&P 500 index's return in 2014, an investor reinvesting dividends in the S&P 500 would have theoretically done even better: 14.04%.
Subtract from that (of course) applicable taxes, fees, slippage/timing concerns - but… needless to say, buying, holding, and reinvesting was a very lucrative strategy this year.
The S&P 500's 2014 Drive
After the large 32.39% dividend reinvested return in 2013, a further 14.04% is more than most could have asked for on such a widely invested index - happy new year for that! Compound that with 2012's 16.00% dividend reinvested return and you're looking at a huge 74.60% reinvestment return just from sitting on your hands and reinvesting your funds - a hefty geometric average of 20.46% a year!
Marketwatch Chart of S&P 500 Total return vs. S&P Index
|01/01/2014 Open||12/31/2014 Close||Annual Return|
|S&P 500 Total Return||3305.28||3769.44||14.04%|
|S&P 500 Index||1842.61||2058.9||11.74%|
Buying and Holding
We, of course, have a few calculators which can help you determine the real returns of theoretical holdings - our S&P 500 Total Return Calculator works on a monthly basis, while our retrospective calculator allows you to compare all rolling S&P 500 reinvested returns. We also have a calculator for individual stock reinvestment calculations.
The retrospective calculator ranks the last three years very highly - (Top) 38.12%, 12.00%, 41.96% of years, respectively - all in the top half (and more than half of rolling years are positive returns). Add to that all of the other gains since March of 2009… well, now that's a bull market!
Will we maintain this momentum? Well, no one can say for certain - but since this is the internet, feel free to leave your no-cost-to-you predictions in the comments!
- Where will the S&P 500 go from here?
- Are you a dividend reinvestor?