Expected annual return calculators

January 16, 2019 3 By admin

S & P 500 calculator

What & How

Starting from:

  • what can you expect – long term – from various assets or market indices / ETFs – see post here
  • what do I estimate as a correct price level – see post here

I combined these two to make the calculators below. The formulas built into the calculators are not difficult. For example, the S & P 500 index:

  • my estimate fair price level (end of 2018) is 2200 – see post here
  • the historical growth rate is 8.7 % – see post here
  • which means that a fair price level for the S & P 500 in 5 years will be 2200 x (1.087) 5 = 3339

From that number, you can easily calculate back the annual returns over a 5 – year period starting from any given number.

  • For instance, starting from 2600 today, you get a return of (3335 / 2600) 1 / 5 – 1 = 5.1 % annually. That is a Total Return (including reinvested dividends and excluding inflation adjustment and excluding any expenses and taxes).
  • Simple test: what is the expected annual return for a starting index of 2200?
  • (3335 / 2200) 1 / 5 – 1 = 8.7 % annually. Duh! which was to be expected, since we start from the ‘fair index level’ 2200 we can also expect the average annual return of 8.7 %.

The other calculators apply the same simple logic.

I do not pretend that the outcome is exact, nor that I predict the future. But they are useful to have an indication of what can be expected. When the S&P 500 goes to 2940, as it went in August 2018, the calulator says that your returns will be 3% dividend included. When the market goes to 2346 as in December 2018, the calculator says 7 % annually. It gives you a good indication when to move more savings into an ETF and when preferably not to add money.

S & P 500

expected annual return calculator for the next 5 years

S & P 500 Price quote

^GSPC 2.907,4 +0,7%

EURO STOXX 600
expected annual return calculator for the next 5 years

STOXX 600 Price quote

^STOXX 389,1 +0,4%

Global REIT
expected annual return calculator for the next 5 years

FTSE NAREIT Global Price quote

See here

Berkshire Hathaway
expected annual return calculator for the next 5 years

Berkshire Hathaway Price quote

BRK-B 204,5 -0,2%