What if You had Invested $10,000 at the 2008's Low?
Imagine you had invested $10,000 at the bottom in 2008. 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 for this hypothetical situation. 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 eight years.
The S&P 500 consists of approximately 500 large-cap stocks (it’s never exactly 500 stocks these days and tends to change) that are either listed on the NYSE or NASDAQ. Most retail investors refer to the Dow Jones Industrial Average (DJIA), which includes 30 stocks, when talking about how the market is doing. Most professional investors and traders refer to the S&P 500 because it tracks approximately 500 stocks opposed to 30, making it a better indicator of market performance.
The 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 15 shares (rounded up from 14.7 assuming you could have thrown in a few extra bucks). Today, the S&P 500 stands at 1,883.
1,883 – 676 = 1,207
1,207 x 15 shares = $18,105 (net)
Not bad for a $10,000 investment. And this doesn’t include the dividend yield, which is always changing, but currently stands at 2.33% for the S&P 500.
The Dow Jones Industrial Average is intended to track the 30 strongest blue chip stocks throughout the entire market. Historically, it has been weighted toward industrials, but that could change going forward. Regardless, the DJIA stood at 6,507 on March 9, 2009. A $10,000 investment would have bought you 1.5 shares. Today, the DJIA trades at 16,130.
16,130 – 6,507 = 9,623
9,623 x 1.5 shares = $14,434 (net)
This isn’t as big of a gain as if you had invested in the S&P 500. The DJIA does come with a bigger yield, with DJIA stocks currently yielding an average of 3.14%.
The NASDAQ is historically known to track mostly technology stocks. This isn’t as true today as in the past. You will still find plenty of tech stocks in the exchange, which 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. We’ll call it 1,268. A $10,000 investment would have bought you 7.8 shares, which we’ll round up to 8 shares. Today, the NASDAQ trades at 4,081.25; we’ll call it 4,081.
4,081 – 1,268 = 2,813
2,813 x 8 shares = $22,504 (net)
Since the NASDAQ consists of a lot of growth stocks, you won’t find as much yield. For example, the NASDAQ 100 currently yields 1.09%. However, with that return on the appreciation side, it’s doubtful that you would care much about yield.