U.S. Stock Market: Real Capital Gains

A description of historical, inflation-adjusted capital gains for 1 year, 10 year, 20 year, and 30 year investments in the U.S. stock market as represented by the S&P 500 index using a number of relevant new charts.

The S&P 500 index is a reasonable representation or change in overall U.S. stock market prices over time. When adjusted for inflation (aka "real"), as in the following chart, it is a reasonable representation of the change in overall U.S. stock market value over time:

A capital gain (or loss), is the change in value of an asset from purchase price to sales price. The next four charts show, for every month, the real (inflation-adjusted) capital gains or losses that would have been realized when selling an S&P 500 index fund that had been purchased 1 year, 10 years, 20 years, or 30 years prior. These charts are useful for determining how often an investment of the specified length would have produced a capital gain vs. a loss over the last century or so. One significant caveat for the charts and discussion here is that dividends are not considered. See 11/09/20 Post - S&P 500 Total Returns for charts and discussion that includes dividends.

This next chart illustrates that in the last few decades, annual capital gains have been more common than annual capital losses. For earlier decades, the number of years with capital losses look similar to the number of years with capital gains. Although the annual gains tend to be larger than the annual losses.

The next chart shows that for a 10 year investment, capital gains have been significantly more common than capital losses, but periods of capital loss for 10 year investments have still occurred periodically.

As the next chart illustrates, it has been over 30 years since a 20 year investment would have produced a capital loss. However, from the late 1970s to almost the end of the 1980s, all 20 year investments ending in that time window would have produced capital losses.

This next chart shows that there have been no capital losses on 30 year investments since shortly after World War II. However, from the start of the Great Depression until shortly after the war, 30 year capital losses were more common than gains.

Including dividends has a significant impact on historical real total returns as discussed in 11/09/20 Post - S&P 500 Total Returns. See also Topic - U.S. Stock Market for other related charts and commentary.