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S&P Returns and ROR Explained

 

NC Cpl
(@nc-cpl)
Eminent Member Customer
Joined: 2 months ago
Posts: 26
Topic starter  
  1. S&P Returns (historical - both nominal and inflation-adjusted): https://www.officialdata.org/us/stocks/s-p-500/1940?amount=100&endYear=2021
  2. Real Rate Of Return (ROR) Explained (graphic): http://www.cpsimis.com/pdfs/Real%20Rate%20of%20Return%20BW.pdf

Encourage other knowledgeable PRC users to share their best sources for data that is used in PRC Gold!


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Bill Hines, Retirement Planner
(@hines202)
Trusted Member Customer
Joined: 8 months ago
Posts: 60
 

Thanks for those great sources, @nc-cpl. I'd remind folks to look at a total US stock market fund rather than an S&P index fund if that's an option. It provides all that nice small-cap growth exposure and further diversifies the portfolio. For example, Vanguard's VTSAX fund (VTI is the ETF equivalent).

On the international side, the equivalent is VXUS (ETF). That said, many 401k and other plans are limited in this scope, and only provide an S&P fund as an index choice for equities.

Bill Hines
Investment Advisor/Financial Counselor/Retirement Planner
Emancipare Investment Advisors LLC
https://emancipare.com
bill@emancipare.com


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Pizza Man
(@giovanelli766)
Active Member Customer
Joined: 8 months ago
Posts: 10
 

Please be aware that for Total US market funds, because of the way the companies are weighted, that about 80% of the fund is composed of basically the S&P 500 stocks, so they are heavily weighted to big companies. To get truly diversified, you could use Fidelity Zero Large Cap Index fund (their version of the S&P 500 with zero fees & expenses) and match it with Fidelity Zero Extended Market Index fund which includes company 501 through 2,500, which are basically mid and small cap stocks of the US market.

Pizza Man


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Bill Hines, Retirement Planner
(@hines202)
Trusted Member Customer
Joined: 8 months ago
Posts: 60
 

Agreed, many folks assume those 'total market' funds are equal shares in all publicly traded companies. They are weighted heavily toward the top, but I like that 20% in the bottom/growth.

Those Fidelity Zero funds are very new, so there's not a lot of data/history. They have a few minor gotchas - they can't be owned outside of Fidelity is one. So for example if you someday wanted to move your Fidelity portfolio to Vanguard or somewhere, they would have to be liquidated (possibly incurring gains, taxes) rather than transferred in-kind. This is also a problem if you have to do RMDs someday and want to do them as shares instead of cash from traditional IRA to brokerage. They also 'sample' rather than replicate the index. They throw off more dividends and capital gains than a straight index fund, so not as good in a taxable account, but in tax-deferred doesn't matter. Some people worry that these Zero funds are a gimmick/loss-leader to compete with Vanguard's low fee funds and may go away after a while.

Bill Hines
Investment Advisor/Financial Counselor/Retirement Planner
Emancipare Investment Advisors LLC
https://emancipare.com
bill@emancipare.com


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Pizza Man
(@giovanelli766)
Active Member Customer
Joined: 8 months ago
Posts: 10
 

No fund is perfect and I do have most of our investments with Fidelity which offers more services then Vanguard, so the funds are a loss leader, not a gimmick, so they make that up with other services, most of which I do not use. You are right about having the Zero funds in a taxable account, my Zero funds are in retirement accounts. I am more than 10 years away from RMD's so I will take the savings of zero fees and zero expenses ratio's over that time period. Fidelity "samples" the index because many of them (such as S&P 500) is copy righted (or what ever term applies). Thanks for your input Bill.


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