Investing

S&P/TSX & S&P500 Total Return Annual Averages for 10, 15, 20, 25, 30, 35, 40, 45, 50, 55 & 60 Years

  • Last Updated:
  • Feb 3rd, 2019 6:54 pm
[OP]
Deal Guru
Aug 2, 2010
13570 posts
3627 upvotes
Here 'n There

S&P/TSX & S&P500 Total Return Annual Averages for 10, 15, 20, 25, 30, 35, 40, 45, 50, 55 & 60 Years

Many people quote the raw returns from difference indices. However, what is much more important is the return with reinvested dividends as that is the return you would enjoy from investing in that index. So, I thought many of you would be interested in this chart I prepared. I have the total returns ('TRIV') index for the S&P/TSX (and it's prior variants, such as the TSE Composite, TSE 300, etc) going back over 60 years. The complete TRIV data set is only available for purchase from the TSX/TMX as they only publish the last couple of years online. I also have the same returns for the S&P 500.

Note that over 90-95% of professional money managers cannot beat a simple index over 20 years. That's why Warren Buffett advises everyone invest in an index fund.

Ret.jpg

Note: The calculations above ignores the effect of taxation which would be different for everyone and which would not be that great a drag on returns anyway as the dividend payout is typically in the order of 2% +/- from either index and few of the holdings are sold on an annual basis so minimal capital gains are triggered. So, if you buy and hold, which you should, the income tax is minimal. Of course if you hold them in a registered account there is no tax until redeemed. Also, note that currency gain/loss from CAD->USD on initial purchase and USD->CAD on redemption at the end of the periods for the S&P500 is not accounted for in the mix calculations.
32 replies
[OP]
Deal Guru
Aug 2, 2010
13570 posts
3627 upvotes
Here 'n There
The other thing to remember is that if you think you hired some hotshot stock broker or high net worth private money manager (they all have slick presentations and wear nice suits, don't they?) you won't know for 20 years whether they proved to be one of the 5% that can beat the index. Also, just because they have in the past does not mean they will in the future. As that goes most don't even have that long a performance record or won't even provide one in their presentation.
Member
Sep 9, 2012
372 posts
119 upvotes
TORONTO
Thanks for putting this together.
Great to keep in mind as to what a 'normal' range of returns looks like over longer periods, and what returns look like when dividends are reinvested.
Deal Addict
User avatar
Dec 27, 2011
2776 posts
1150 upvotes
Waterloo
Thanks, that's actually a bit higher than I thought. So if you're investing for several decades then historically you're looking at ~9% return. Pretty good!
[OP]
Deal Guru
Aug 2, 2010
13570 posts
3627 upvotes
Here 'n There
crystallight wrote:
Feb 1st, 2019 11:17 am
Thanks, that's actually a bit higher than I thought. So if you're investing for several decades then historically you're looking at ~9% return. Pretty good!
Yes, but that return is with a significant S&P500 index exposure, which also gives you worldwide exposure as 50%+/- of the sales of S&P500 companies is international. Most Canadian investors have a high domestic bias and therefore have the majority of their portfolio domestic. If you have a long term time horizon, which severely dampens the effect of currency conversion, then given the Canadian stock market, of which the S&P/TSX Index represents the majority of, is about 2% of world markets you should have well over 90% of your portfolio outside of Canada. People just don't do that but it makes the most sense.

As S&P500 indexes go in terms of management fees, you can't beat Vanguard's S&P 500 Index at 0.08% management fee ('MER'), ticker VFV, which for $1M invested would be a mere $800/year. They do have a CAD-hedged version, ticker VSP at the same 0.08% MER but the returns are significantly less as you are then hedged against currency fluctuations which then does not provide you the benefit of them when they go in your favour (as the USD has for a while now), not to mention to buy the hedges costs the fund money.

With Vanguard having such a low MERs, it's amazing that so many are enamoured with so-called robo-advisors (that really have people making all the decisions behind the app and website as the OSC does not allow true automated investment management) such as Wealthsimple that charge 0.4%, but then Wealthsimple spends an incredible amount of money on marketing whereas Vanguard (5 Trillion in assets worldwide and non-profit) spends almost nothing. Vanguard even has Balanced, Conservative and Growth portfolios just like Wealthsimple and only charges about 1/2 the MER of the latter. Wealthsimple is no more 'robo' that Vanguard in that respect. Also, with Vanguard as their profit increases it is all put towards reducing the MERs of their funds even further unlike Wealthsimple whose goal is to earn a profit.
Last edited by eonibm on Feb 1st, 2019 12:33 pm, edited 1 time in total.
[OP]
Deal Guru
Aug 2, 2010
13570 posts
3627 upvotes
Here 'n There
TorontoDavid wrote:
Feb 1st, 2019 11:08 am
Thanks for putting this together.
Great to keep in mind as to what a 'normal' range of returns looks like over longer periods, and what returns look like when dividends are reinvested.
When I have the time I will be updating the chart to include the returns for each index without dividends reinvested just to demonstrate the massive difference reinvested dividends makes to returns (which can be done automatically, ie DRIP). The key here is these are no-brainer investments at very low MER's if you stay away from active managers and 'robo-advisers' but choose something like Vanguard with their insanely low MERs that can only go even lower as they are non-profit.
Sr. Member
Feb 26, 2017
966 posts
603 upvotes
This isn't Canada but shows how investors can be their own worst enemies.

Image
[OP]
Deal Guru
Aug 2, 2010
13570 posts
3627 upvotes
Here 'n There
Chance7652 wrote:
Feb 1st, 2019 12:32 pm
This isn't Canada but shows how investors can be their own worst enemies.

Image
Yes and add professional money managers to that chart and for that 20-year period 92%+ of them are far to the right of the S&P 500 return of 7.2% (which I confirmed is accurate btw for that period). In fact it's even worse. The following annual performance analysis for just 15 years to 2017 (and it only gets worse for longer periods) is from SPIVA (S&P Dow Jones Indices Versus Active (SPIVA), a division of S&P Global). What dismal performance for paying outrageous active management fees to a bunch of CFA's in nice business suits spending many hours every day trying to beat the index. So much for all that education and analysis!:

spivas.jpg
Deal Addict
User avatar
Dec 27, 2011
2776 posts
1150 upvotes
Waterloo
eonibm wrote:
Feb 1st, 2019 12:14 pm
Yes, but that return is with a significant S&P500 index exposure, which also gives you worldwide exposure as 50%+/- of the sales of S&P500 companies is international. Most Canadian investors have a high domestic bias and therefore have the majority of their portfolio domestic. If you have a long term time horizon, which severely dampens the effect of currency conversion, then given the Canadian stock market, of which the S&P/TSX Index represents the majority of, is about 2% of world markets you should have well over 90% of your portfolio outside of Canada. People just don't do that but it makes the most sense.

As S&P500 indexes go in terms of management fees, you can't beat Vanguard's S&P 500 Index at 0.08% management fee ('MER'), ticker VFV, which for $1M invested would be a mere $800/year. They do have a CAD-hedged version, ticker VSP at the same 0.08% MER but the returns are significantly less as you are then hedged against currency fluctuations which then does not provide you the benefit of them when they go in your favour (as the USD has for a while now), not to mention to buy the hedges costs the fund money.

With Vanguard having such a low MERs, it's amazing that so many are enamoured with so-called robo-advisors (that really have people making all the decisions behind the app and website as the OSC does not allow true automated investment management) such as Wealthsimple that charge 0.4%, but then Wealthsimple spends an incredible amount of money on marketing whereas Vanguard (5 Trillion in assets worldwide and non-profit) spends almost nothing. Vanguard even has Balanced, Conservative and Growth portfolios just like Wealthsimple and only charges about 1/2 the MER of the latter. Wealthsimple is no more 'robo' that Vanguard in that respect. Also, with Vanguard as their profit increases it is all put towards reducing the MERs of their funds even further unlike Wealthsimple whose goal is to earn a profit.
I'm currently using e-series and have the following allocations:
- 33.3% Canada index
- 33.3% US index
- 33.3% International Index (hey any plans to do the same total returns but with the MSCI EAFE?)

I'm just doing couch potato method but I decided against bonds as I won't he touching this money until retirement and figured growth will (likely) be more without bonds in it.
[OP]
Deal Guru
Aug 2, 2010
13570 posts
3627 upvotes
Here 'n There
crystallight wrote:
Feb 1st, 2019 1:31 pm
I'm currently using e-series and have the following allocations:
- 33.3% Canada index
- 33.3% US index
- 33.3% International Index (hey any plans to do the same total returns but with the MSCI EAFE?)

I'm just doing couch potato method but I decided against bonds as I won't he touching this money until retirement and figured growth will (likely) be more without bonds in it.
I don't know where to get total returns for MSCI EAFE and if they are available I am sure it costs money. I doubt they will not be appreciably different from the S&P 500 index. Comparing the annual raw returns of the MSCI EAFE to the S&P500 will give you an idea. I wouldn't be so high with your Canada component if you have such a long term time horizon. It just doesn't make sense to put so many eggs in such a tiny basket (2% of world market and so concentrated in very few industry segments). I wouldn't be so high international either as the S&P500 already gives you that which means your weighting is much greater than you think internationally. You are right about bonds. For a long term time horizon they make no sense other than to dampen the ride so you have less volatility and lower your returns in the process. I'd rather end up with more money and have a bit more volatility as it matters more where you end up than your portfolio value during the ride.

Having said what is most important is to:

1. Be indexed so you are paying very low fees;
2. Have a long time horizon; &
3. Invest regularly & consistently.
Deal Addict
User avatar
Dec 27, 2011
2776 posts
1150 upvotes
Waterloo
eonibm wrote:
Feb 1st, 2019 1:45 pm
I don't know where to get total returns for MSCI EAFE and if they are available I am sure it costs money. I doubt they will not be appreciably different from the S&P 500 index. Comparing the annual raw returns of the MSCI EAFE to the S&P500 will give you an idea. I wouldn't be so high with your Canada component if you have such a long term time horizon. It just doesn't make sense to put so many eggs in such a tiny basket (2% of world market and so concentrated in very few industry segments). I wouldn't be so high international either as the S&P500 already gives you that which means your weighting is much greater than you think internationally. You are right about bonds. For a long term time horizon they make no sense other than to dampen the ride so you have less volatility and lower your returns in the process. I'd rather end up with more money and have a bit more volatility as it matters more where you end up than your portfolio value during the ride.

Having said what is most important is to:

1. Be indexed so you are paying very low fees;
2. Have a long time horizon; &
3. Invest regularly & consistently.
I have definitely thought about putting less in Canada and international in the past. Do you mind sharing what your allocation is?

Maybe I'll do 50% US, 25% Canada, 25% International
[OP]
Deal Guru
Aug 2, 2010
13570 posts
3627 upvotes
Here 'n There
crystallight wrote:
Feb 1st, 2019 2:27 pm
I have definitely thought about putting less in Canada and international in the past. Do you mind sharing what your allocation is?

Maybe I'll do 50% US, 25% Canada, 25% International
My passive portfolio is 95% S&P500 and the rest Canadian dividend-paying stocks only. The international exposure is built into the S&P500 and partly the Canadian one. I then have an active portfolio of just a few US stocks (less than 10) for long-term holds.
Deal Addict
User avatar
Apr 13, 2008
3005 posts
967 upvotes
Vancouver
eonibm wrote:
Feb 1st, 2019 3:35 pm
My passive portfolio is 95% S&P500 and the rest Canadian dividend-paying stocks only. The international exposure is built into the S&P500 and partly the Canadian one. I then have an active portfolio of just a few US stocks (less than 10) for long-term holds.
I've only been working for a year but this is my current plan.

TFSA = gambling money - currently small caps and weed stocks
RRSP and other investments account will be the S&P500 index and some canadian dividend stocks (maybe some US tech stocks for fun)

Currently down 10% :S
Jr. Member
Jan 18, 2016
148 posts
36 upvotes
Winnipeg, MB
Chance7652 wrote:
Feb 1st, 2019 12:32 pm
This isn't Canada but shows how investors can be their own worst enemies.

Image
or you could buy a bar of gold and not worry about anything?
Sr. Member
Feb 26, 2017
966 posts
603 upvotes
twowood wrote:
Feb 1st, 2019 5:06 pm
or you could buy a bar of gold and not worry about anything?
Not what I'll be doing.

Top