0

I'm trying to understand how to measure the growth of a particular stock index over a certain period of time, e.g. 5 years.

As far as I understand, for calculating the total growth, you need to do

((end - begin) / begin) * 100

Being end and begin the final and initial value (respectively) of the index in question, over the selected period of time (in this example 5 years from now)

According to google, comparing S&P 500 (USA), FTSE 100 (UK) and DAX 30 (GER), from 5 years ago until now, I obtain:

FTSE 100: ((7344 - 6527) / 6527.0) * 100.0 = 12.51723609621572

DAX 30: ((12468 - 9490) / 9490.) * 100. = 31.38040042149631

S&P 500: ((2992 - 1982) / 1982.) * 100.0 = 50.95862764883956

This seems to be a nonsense. Are the above results correct?

If so, under which circumstances would it be better to invest in the DAX 30 or FTSE 100, given that their growth is far less than the S&P 500? (Even taking into account tax free bank accounts in your country + avoid fees in changing currencies)

  • 2
    "This seems to be a nonsense." Why do you think it's nonsense? – RonJohn Sep 26 at 16:04
  • You picks yer metrics and you pays yer money. What are you trying to measure? – Lawrence Sep 26 at 16:10
  • @RonJohn I thought that because it seemed to me a very (insane) difference between these stock indexes. I still can't understand how someone could want to invest in DAX 30 or FTSE 100, I must be missing something. – Martel Sep 26 at 16:38
  • @Lawrence I was trying to imagine which index stock is better, given the circumstance that if live for instance in the UK, you can open an ISA that is tax free up to £20k yearly, and you don't have problems with currency exchange. But given the numbers above, it makes absolutely no sense to invest in some index other than the S&P or similar, as far as I understand, even taking into account the tax relief etc. – Martel Sep 26 at 16:40
  • 1
    @Martel One of the problems with historical data is that past trends don't determine future trends. – Lawrence Sep 26 at 16:47
1

Try using something like the Yahoo Finance tracker to get a graph to show the comparison. Example. This approach has the advantage of letting you adjust the length of the time frame and slide it around to see how these indices have performed at different points.

One thing not captured by this approach will be the difference in the currency exchange rates. I live in Canada but hold VTI which tracks the US stock market. When the market remains constant but the Canadian dollar drops I see a gain in my fund.

When applying your formula to the actual funds themselves don't forget that these funds pay dividends as well (which aren't captured well in the Yahoo finance chart). Try using this website to assess the performance of the actual ETFs you'd be buying.

Once you actually buy some funds you may want to use something like the website Sharesight to keep track of your investments as it actively tracks dividend payments and currency gains in addition to growth in the equity itself. It's also free if you're only tracking <10 funds.

  • 1
    Why use Sharesight to track dividend payments, when your broker's website shows dividend payments? – RonJohn Sep 26 at 16:22
  • @RonJohn I purchase Vanguard funds through my bank so that I can see the balance on all my accounts in the same location. My bank's website has a pretty terrible layout though so I use Sharesight to get better visuals. – Dugan Sep 26 at 16:30
  • @Dougan you'd probably be a lot better off buying more of the fund(s) than paying for Sharesight, or any other paid portfolio tracker. – quid Sep 26 at 16:56
  • @quid Absolutely. Don't pay for something you can get for free. Sharesight is free if you track 10 or fewer stock tickers. – Dugan Sep 26 at 17:01
  • @RonJohn. You can't buy through Vanguard directly in Canada (where I live) (Source). Fortunately my bank offers free currency exchange so it almost offsets the added brokerage fee of $6.95. – Dugan Sep 26 at 19:02
0

Here's a nice simple DRIP Calculator that will allow you to pick the time frame and provide historical results for dividend reinvestment and without it. You can verify your numbers easily:

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.