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Where’s My Compounding?

November 15, 2010

One oft-touted benefit of long-term investing is the effect compounding has on money. We’re told to invest in mutual funds, rake in our 8-10% gains each year, let that grow for 30 years and you’ll be rich enough to hopefully retire.

I was looking at returns of the S&P 500 this morning and wondered what the market has done since I graduated college in the summer of 1998. It ain’t pretty.

  • In June 1998, the S&P 500 closed at 1,133.84.
  • It currently sits around 1,200, but at the beginning of 2010 was roughly at the same level as June 1998.

12 years of 8-10% gains I was supposed to get are gone.

 

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