Question of the Day: What has been the [geometric] average return for the stock market over the past 50 years?

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Oct 30, 2017
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Investing, Index Funds, Question of the Day, Research

Answer (from NYU data set): 10.09%

Here's the chart:

This NYU data set is a great one for math teachers or if you want to teach spreadsheet skills and have students calculate means, medians, percentages and also get a feel for how different investments perform over long periods of time. 

Questions:

  1. Do you think that putting your money in a savings account will earn you a higher or lower return than an investment in the stock market? Why?
  2. The stock market was down over 37% in 2008 which was the worst year for the market over the past 50 years. How do you think you would react to such a loss in a given year?
  3. Your friend says that the stock market is rigged and most people lose money there. Would you agree or disagree with him?
  4. Is it fair to assume that the stock market will return about 10% a year in the future. Why or why not?

Advanced: 

  1. Reviewing the NYU data set and looking at the past 50 years, what percentage of years did the S&P 500 have a positive return? 
  2. In the years that the S&P500 had a loss, how did the 10 Year Treasury bond investment perform? How would you describe the purpose of a bond investment since it is often expected to have lower returns than stocks?

Here's the ready-to-go slides for this Question of the Day that you can use in your classroom.

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For those students who think they can time the market and know when to jump in and jump out, humble them with this investing interactive, Think You Can Beat the Stock Market?

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NGPF has just started a new service: The Daily QuoD (that's Question of the Day in NGPF-speak!). Subscribe to our blog (right hand side of NGPF Blog homepage) and you will receive a new QuoD every weekday during the school ready to use in your classroom. Enjoy!

 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.