S&P 500, buy and hold
Buy and hold the S&P 500
Where it stands today
Our calculation, 1926-07 – 2026-09
Growth of $10,000
Where it came from
The S&P 500 grew out of stock indexes built by a rating firm. According to Wikipedia's account, in 1923 Standard Statistics Company, which already rated bonds, created its first stock index covering 233 U.S. companies, computed weekly. In 1926 it moved to a 90-stock index computed daily. In 1941 the firm merged with Poor's Publishing (the descendant of Henry Varnum Poor's 19th-century railroad manuals) to form Standard & Poor's.
On 4 March 1957 the index was widened to 500 companies and renamed the S&P 500 Stock Composite Index; this date is the start of the modern index. In 1962 Ultronic Systems became the compiler of the S&P indices. The 1957 start is why almost every 'S&P 500' history before 1957 is actually a reconstruction from the earlier 90-stock and composite series, not the live index.
Academic work on how to measure the whole U.S. market preceded it. The Cowles Commission for Research in Economics was founded in 1932 in Colorado Springs by Alfred Cowles (it moved to Chicago in 1939 and to Yale in 1955, becoming the Cowles Foundation). Cowles's monograph 'Common-Stock Indexes, 1871-1937' (Cowles Commission Monograph no. 3, 1938; second edition January 1939) rebuilt a monthly U.S. stock price, dividend and yield series back to 1871. His biography says that frustration with stock-forecasting 'guessing games' in his investment-counseling work pushed him into research. These Cowles series are the basis of most long-run U.S. stock return histories that reach before the 1920s.
The idea of simply owning the whole market for ordinary investors was turned into a product by John C. Bogle. His 1951 Princeton thesis already stressed costs as a drag on investor returns. On 31 August 1976 he launched First Index Investment Trust (today the Vanguard 500 Index Fund), the first index fund offered to individual investors. He hoped to raise 50-150 million dollars but raised only a little more than 11 million, which he called an abject failure; critics nicknamed it 'Bogle's Folly'. For roughly six months it was sold through brokers with a sales load; all Vanguard funds became no-load in early 1977. Initial annual operating expenses were 0.43 %.
Later milestones from the index's history: futures on the index began trading at the Chicago Mercantile Exchange on 21 April 1982 and options at the CBOE on 1 July 1983; the first S&P 500 ETF (SPDR, State Street) began trading on 22 January 1993; the E-mini futures arrived on 9 September 1997; in 2005 the index switched to public-float-adjusted capitalisation weighting. Expenses of the Vanguard ETF and Admiral shares have fallen to about 0.03-0.04 % per year, according to Vanguard.
What is in it
| S&P 500 index (large-cap U.S. stocks) | 100% | Single holding by definition. |
How we model it
| US large companies (S&P 500) | 100% |
For a euro investor
How to build it with European funds
| Part | Share | Example funds (ISIN) |
|---|---|---|
| US large companies (S&P 500) | 100% | iShares Core S&P 500 UCITS ETF USD (Acc) IE00B5BMR087Vanguard S&P 500 UCITS ETF (USD) Distributing IE00B3XXRP09 |
The idea
Own a cross-section of the largest U.S. businesses at minimal cost and do not try to time or pick. The idea rests on the belief that most active managers cannot beat the index after fees (Bogle's cost argument; Buffett's endorsement in his letters).
How people buy it
Index mutual funds and ETFs tracking the S&P 500, e.g. Vanguard 500 Index Fund (VFIAX/VFINX), Vanguard S&P 500 ETF (VOO), SPDR S&P 500 ETF (SPY), iShares Core S&P 500 (IVV). Dividends reinvested.
Rebalancing as published
None: a single asset, so nothing to rebalance. Typical advice is to contribute regularly and not sell in downturns.
Variants
- Total U.S. market fund (adds mid and small caps)
- Global equity index (adds non-U.S. stocks)
- Equal-weight S&P 500
- Adding bonds: see the 90/10 Buffett and 60/40 models
Criticism
- Concentration: a capitalisation-weighted index grows more heavily in whichever sectors are expensive (the dot-com years are the usual example) - general critique, not sourced here.
- 100 % equities means full exposure to deep drawdowns; the model has no defensive asset.
- Only U.S. large caps: no foreign, small-cap or real-asset diversification.
- Survivorship of the U.S. market: long U.S. results may overstate what a global investor could expect (a standard academic caveat, not sourced here).
Through the eras
| Era | Dates | Total | Per year | Worst drop | S&P 500 |
|---|---|---|---|---|---|
| Roaring Twenties boom | 1926-07 – 1929-08 | +153.7 % | +34.2 % | −5.9 % | +153.7 % |
| Wall Street crash and Great Contraction | 1929-09 – 1932-07 | −78.2 % | −40.6 % | −83.7 % | −78.2 % |
| New Deal recovery | 1932-08 – 1937-02 | +268.7 % | +32.9 % | −28.9 % | +268.7 % |
| Recession within the Depression | 1937-03 – 1938-03 | −49.5 % | −46.7 % | −49.5 % | −49.5 % |
| Rearmament and World War II | 1938-04 – 1945-09 | +205.8 % | +16.1 % | −28.1 % | +205.8 % |
| Postwar expansion | 1945-10 – 1965-12 | +1212.9 % | +13.6 % | −24.3 % | +1212.9 % |
| Golden age of the 1950s | 1950-01 – 1959-12 | +438.8 % | +18.3 % | −14.9 % | +438.8 % |
| Go-go years and nifty-fifty | 1966-01 – 1968-12 | +34.0 % | +10.2 % | −15.5 % | +34.0 % |
| The Great Inflation (stagflation) | 1969-01 – 1982-07 | +84.6 % | +4.6 % | −46.5 % | +84.6 % |
| 1973-74 oil shock and bear market | 1973-01 – 1974-12 | −41.7 % | −23.7 % | −46.5 % | −41.7 % |
| Second oil shock and the Volcker disinflation | 1979-01 – 1982-08 | +59.2 % | +13.5 % | −16.3 % | +59.2 % |
| Great bull market in stocks and bonds | 1982-08 – 1999-12 | +2060.4 % | +19.3 % | −29.9 % | +2060.4 % |
| Black Monday | 1987-08 – 1987-12 | −21.8 % | — | −29.9 % | −21.8 % |
| Savings-and-loan crisis and 1990 recession | 1990-07 – 1991-03 | +7.4 % | — | −16.5 % | +7.4 % |
| 1994 bond market massacre | 1994-02 – 1994-12 | −3.2 % | — | −7.6 % | −3.2 % |
| Asian and Russian financial crises | 1997-07 – 1998-10 | +22.4 % | +16.4 % | −17.3 % | +22.4 % |
| Dot-com bubble and crash | 2000-03 – 2002-10 | −37.2 % | −16.0 % | −45.0 % | −37.2 % |
| Recovery and housing boom | 2002-11 – 2007-09 | +97.0 % | +14.8 % | −9.6 % | +97.0 % |
| Global financial crisis | 2007-10 – 2009-03 | −44.7 % | −32.6 % | −50.3 % | −44.7 % |
| The decade after the crisis | 2009-04 – 2019-12 | +411.2 % | +16.4 % | −17.7 % | +411.2 % |
| Fourth-quarter 2018 sell-off | 2018-09 – 2018-12 | −14.4 % | — | −14.5 % | −14.4 % |
| Covid crash and stimulus boom | 2020-02 – 2021-12 | +53.6 % | +25.1 % | −20.2 % | +53.6 % |
| Inflation shock and rate hikes | 2022-01 – 2022-12 | −19.9 % | −19.9 % | −24.8 % | −19.9 % |
Calendar years
Any N-year period
| Any N-year period | Worst | 10 % worse than | Median | 10 % better than | Best |
|---|---|---|---|---|---|
| 1 y (1192) | −65.7 % | −12.9 % | +13.9 % | +35.4 % | +156.4 % |
| 3 y (1168) | −42.9 % | −4.5 % | +11.8 % | +23.1 % | +44.2 % |
| 5 y (1144) | −19.4 % | −0.5 % | +11.6 % | +19.3 % | +35.0 % |
| 10 y (1084) | −5.4 % | +3.5 % | +11.2 % | +16.6 % | +20.5 % |
| 15 y (1024) | −0.4 % | +5.6 % | +10.8 % | +15.9 % | +18.9 % |
| 20 y (964) | +1.8 % | +7.0 % | +10.8 % | +14.7 % | +18.1 % |
| 30 y (844) | +7.5 % | +9.7 % | +10.8 % | +12.9 % | +14.5 % |
How it behaved in history
- 1976 - launch of the first index fund. The first index fund raised only about 11 million dollars and was derided as 'Bogle's Folly'; it grew into one of the largest funds in the world. corporate.vanguard.com
- 1987-10-19 Black Monday. The largest one-day percentage fall in U.S. stock market history, per Wikipedia's list of crashes. en.wikipedia.org
- 2008-2009. The index fell 37.0 % in calendar 2008 and rose 26.6 % in 2009 (Buffett's bet table). www.berkshirehathaway.com
- 2020 and 2022. Fast 34 % fall in Feb-Mar 2020; 27.55 % decline in 2022 (Jan-Oct). en.wikipedia.org
Published results (by others)
- Vanguard 500 Index Fund (Investor Shares) average annual return since 1976 inception (31 Aug 1976 - 31 Mar 2026): 11.44 % per year, 0.24 points below the S&P 500 itself corporate.vanguard.com
- Hypothetical 10,000 USD invested in the fund at inception (1976 - 31 Mar 2026): nearly 2.0 million USD corporate.vanguard.com
- S&P 500 return in 2008 (Buffett bet table) (2008): -37.0 % www.berkshirehathaway.com
- S&P 500 index fund average annual gain over the ten bet years (2008-2017): 8.5 % per year, 125.8 % total www.berkshirehathaway.com
- Drawdown of the 2020 crash (Feb - 23 Mar 2020): -34 % peak to trough en.wikipedia.org
- Drawdown 2022 (Jan - Oct 2022): -27.55 % peak to trough en.wikipedia.org
What we could not verify
- Exact 1957-onward 'eras' of the index (1960s Nifty Fifty, 1970s stagflation, 1982-2000 bull market, 2000-02, 2007-09, 2010s) are described from general knowledge; no source was fetched with figures, so no numbers are given here.
- Samuelson's 1974 article as inspiration appeared in a search summary only; not confirmed on Vanguard's page.
- Cowles 1871 start and the 1933 'Can Stock Market Forecasters Forecast?' paper: the 1871-1937 title is confirmed by Cowles Foundation catalogue; the 1933 paper title is from memory.
- The 1923/1926 Standard Statistics index counts come from Wikipedia only.
Sources
- en.wikipedia.org
https://en.wikipedia.org/wiki/S%26P_500 - corporate.vanguard.com
https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/50-years-50-facts-indexing-since-1976.html - cowles.yale.edu
https://cowles.yale.edu/research/cfm-32-common-stock-indexes-2nd-ed - en.wikipedia.org
https://en.wikipedia.org/wiki/Cowles_Commission_for_Research_in_Economics - cowles.yale.edu
https://cowles.yale.edu/people/alfred-cowles - www.berkshirehathaway.com
https://www.berkshirehathaway.com/letters/2017ltr.pdf - en.wikipedia.org
https://en.wikipedia.org/wiki/List_of_bear_markets
Calculated on historical data. Past results do not predict the future. Models before the 1990s use stand-ins for classes that had no index yet; fees, taxes and fund costs are not included. This is mathematics, not an investment recommendation.