Visualizing the Best & Worst Investment Periods in History

The best & worst investment periods in history
4 min read


All of the following calculations use inflation-adjusted S&P 500 returns and assume that dividends were reinvested each year. I gathered data for this post from NYU Stern.


If you invested $100 into the S&P 500 at the beginning of 1999, that $100 would have been worth just $68 by the end 2008. This marked the worst 10-year investment period ever for the S&P 500 since 1928. 

However, if you invested $100 into the S&P 500 at the beginning of 1949, that $100 would have blossomed into $521 just ten years later by the end of 1958. This marked the best 10-year investment period ever for the S&P 500 since 1928.

That’s a massive difference in returns between the best and the worst 10-year periods.

This brings up an interesting question: what have been the best and worst investment returns during every possible period since 1928? For example, what are the best and worst 3-year returns? Or 15-year returns? Or 40-year returns? 

Let’s find out!

The Best & Worst Investment Periods in History

The following table shows the best and worst annualized returns for every investment period since 1928 ranging from a period of 1 year up to 40 years:

Best and worst S&P 500 historical returns

And here’s a visual look at those numbers:

Best and worst S&P 500 returns

The green line shows the best returns and the red line shows the worst returns by period. For example, during the best 20-year period, the S&P 500 delivered 13.2% annualized returns and during the worst 20-year period it delivered just 0.6% annualized returns:

Best and worst 20-year period investment returns

Notice the obvious pattern here: annualized returns can vary significantly during short time frames, but not as much over longer time frames. 

For example, the best 5-year period saw annualized returns of 25.3% while the worst 5-year period saw annualized returns of -10.3%.

Conversely, the best 40-year period saw 8.8% annualized returns while the worst 40-year period saw 4.2% annualized returns.

It’s also helpful to think about these returns in terms of dollars. For example, consider if you invested $100 into the S&P 500 in a given year. The following table shows what that $100 would have turned into during the best and worst return periods:

Best and worst investment returns by period

And here’s a visual look at those numbers:

Example S&P 500 investment of $100 dollars

Conclusion

This analysis highlights some interesting findings:

  • Annualized investment returns can fluctuate significantly during the short-term, ranging from -10.3% to 25.3% during five-year periods. However, annual returns tend to become more steady over longer time periods, ranging from just 4.2% to 8.8% over all possible 40-year periods.
  • The S&P 500 has never experienced a loss during an 18-year period or longer.
  • Even during the worst 30-year period, an investment in the S&P 500 more than tripled in value.
  • The longer your investment time horizon, the higher likelihood that you’ll experience positive returns. The stock market rewards the patient investor.

Further reading:

Here’s How the S&P 500 Has Performed Since 1928
Here’s How the Stock Market Has Historically Performed After a Down Year
The Amount You Invest Often Matters More Than the Returns You Earn

Zach

Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.

Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.

Although the bulk of his net worth is invested in index funds, his favorite place to invest in individual stocks is M1 Finance, a site that allows you to build a custom portfolio of stocks for free.

His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.

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