The S&P 500 has delivered outsized returns over the past decade. In fact, its bull market has effectively run since 2009, excluding the brief blip in spring 2020.
How much would you have had today if you’d invested $10,000 in the S&P 500 a decade ago? And perhaps more importantly, can the party last?
Also see the best S&P 500 exchange-traded funds to watch or invest in now.
10-Year Performance
Running the numbers on Stoculator for the SPDR S&P 500 ETF Trust (SPY), an S&P 500 index fund, a $10,000 investment in early 2016 would have grown to about $42,224.
That investment would’ve yielded $25,911 in capital gains. Additionally, $3,351 would’ve been received in dividends, and those dividends reinvested would’ve resulted in $6,193.
That’s a 322% total return, including dividend reinvestment. Annualized, that comes to 15.49%. Not too shabby!
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What To Expect in the Next 10 Years
Most analysts don’t expect the next decade to deliver anywhere near those returns.
“Expectations are less gaudy for the next 10 years,” explained Ryan Wright, CEO of The Investor’s Edge. “Recent outsized gains were driven by high earnings, technology leadership and improvements in AI and cloud computing that artificially pushed up returns. Analysts expect more modest returns in the next ten years, at best the historical 8-10% range, given today’s higher starting valuations and potential economic headwinds.”
Wright certainly isn’t alone in that prognosis. Robert Johnson, Ph.D., professor of finance at Creighton University, shared a similar forecast. “I doubt that the S&P 500 will return 15% annually over the next ten years, given how much higher that is than the long-term average.”
Even so, Johnson said the odds remain strong for positive returns. “Out of 90 possible ten-year periods between 1926 and 2025, it was positive 96% of the time (86 out of 90 possible periods).”
How To Diversify Beyond the S&P 500
The S&P 500 has grown incredibly top-heavy, with the top 10 stocks in the index making up 38.6% of the weighting, per SlickCharts. That’s more than the bottom 450 companies combined.
If you have money in other U.S. index funds, you probably have double exposure to those same few tech giants like Nvidia (NVDA), Alphabet (GOOGL), Apple (AAPL) and Meta (META).
You could consider buying shares in an equal-weighted S&P 500 fund to level out that playing field. For even broader exposure, you could buy shares in midcap and small cap funds, such as one tracking the Russell 2000 index. You can diversify even further by buying shares in international funds, such as the Vanguard FTSE All-World ex-US ETF (VEU).
“Stocks may still have room to run, but investors should prepare for multiple outcomes rather than assuming the next decade will look like the last one,” Wright said. “In the real world, compounding isn’t a perfect exponential curve — you get the best results from more diversification and time horizon.”
Editor’s note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
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This article originally appeared on GOBankingRates.com: If You Had Put $10K Into an S&P 500 Fund in 2016, Here’s What You Would’ve Had Today
