With less than 20 trading days left in 2019, investors are poised to end the year on a high. The major U.S. stock indexes — including the S&P 500 and Dow Jones Industrial Average — have been setting new records in recent weeks, capping one of the best decades ever for investors.
Even though there has been some bumpiness, the U.S. stock market is in the midst of its longest-ever bull market. If at the end of the last decade, you had bought $500 worth of exchange-traded funds (ETFs) that track the performance of one of the five major U.S. indexes, those investments would be worth anywhere from about $1,500 to more than $2,400 today, depending on which index you picked.
This wide range in returns can be chalked up to which indexes have the most high-flying growth stocks — like the so-called FAANG group, which stands for Facebook, Amazon, Apple, Netflix, and Google parent Alphabet. These tech stocks have been so popular with investors, in part because they've been among the most solid performers, that they were given their own nickname back in 2013.
In addition, where you invested your money, be it in small-, mid- or large-caps, has made a big difference, along with taking into account total returns, which assumes you reinvest dividends. Coming out as the winner of the past decade is the Nasdaq Composite index, followed by the S&P 500.
Here's how those $500 investments would measure up today:
Small-cap stocks bring up the rear for performance in the past decade. These companies, which tend to be more U.S.-focused in their businesses, are the smallest (based on market capitalization, or a measure of a company's value) among the most-closely watched benchmarks. The primary benchmark for this cohort is the Russell 2000 index, made up of approximately 2,000 companies.
If you had invested $500 in an ETF that tracks the performance of the Russell 2000 back in December 2009, that would be worth nearly $1,500 as of December 9, 2019, according to calculations by Grow. That works out to a return of almost 200%.
Rather than just taking into account the change in price (about 161%), we've calculated the total return. That assumes you reinvested the dividends — a portion of a company's or fund operator's profit — you earned each quarter, which is an easy way to grow the value of your portfolio.
While small-cap stocks have done well for investors, they've lagged behind their larger counterparts. That's largely because these companies typically operate a more specialized line of business and can experience more dramatic swings in profitability and stock price.
Mid-cap stocks, slightly bigger companies, are the fourth-best performers of the past decade. One of the most-cited benchmarks for this category is the S&P MidCap 400 index.
A $500 investment in an ETF that tracks the performance of the S&P MidCap 400 back in December 2009 would be worth $1,600 as of December 9, 2019, according to calculations by Grow. That works out to a total return of 220%.
These companies typically are more stable than their small-cap peers, and less stable than their large-cap counterparts. That helps explains why they land where they do: in the middle of the pack.
Video by Courtney Stith
The Dow Jones Industrial Average is one of the most widely cited benchmarks for the U.S. stock market, even though it's made up of just 30 stocks that are meant to be representative of the broader economy. This index dates back to 1896.
If you had invested $500 in an ETF that tracks the performance of the Dow Jones average back in December 2009, that would be worth about $1,695 as of December 9, 2019, according to calculations by Grow. That works out to a total return of nearly 240%.
The past decade has seen several shake-ups in the constituents of this index. For example, Apple replaced AT&T in 2015, while Walgreens Boots Alliance replaced long-standing member General Electric in 2018. Even so, this benchmark has surpassed several thresholds in recent years, including both the 27,000 and 28,000 levels in 2019.
Coming in at second place for the past decade's performance is the S&P 500. This index, made up of 500 of the largest U.S. companies, is considered the primary benchmark for U.S. large-cap companies.
That same $500 invested in an ETF that tracks the performance of the S&P 500 back in December 2009 would be worth more than $1,710 as of December 9, 2019, according to calculations by Grow. That works out to a total return of almost 243%.
Video by Stephen Parkhurst
The Nasdaq exchange is one of the world's largest, and it's one of the most-closely tracked benchmarks for the U.S. stock market. The Nasdaq Composite is made up of more than 3,000 companies that are listed on the Nasdaq exchange. Nearly half of the constituents of this benchmark operate in the technology space, which has been one of the fastest-growing segments of the market (led by that FAANG group).
If you had invested $500 in an ETF that tracks the performance of the Nasdaq back in December 2009, that would be worth more than $2,460 as of December 9, 2019, according to calculations by Grow. That works out to a return of more than 390%.
Regardless of where you invested in the past decade, your money would have benefited from a market that's been rising pretty steadily since 2009. That's why a buy-and-hold index fund strategy would have paid off: You would have bought at the lowest price for these benchmarks in the past decade and then given yourself time to benefit from the market's rally.
Past returns are not indicative of future performance, so going forward it's smart to pick an investment mix that fits with your goals and risk tolerance. In addition to a buy-and-hold approach, experts generally recommend that you continue regularly adding money to your portfolio. That way you have time on your side, a key for long-term investing success, and you'll potentially buy at times when stock prices are lower.
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