38% return* for 8 years for both of these markets (*excluding dividends on both TLT and SPY, and TLT gave off far more dividends along the way).
Notice how the massive drop in the stock market has grinded back to the level where bonds have been for the last 3-4 years.
There is no "trade" on this chart - only an interesting historical return of two markets roughly equaling each other after exactly 8 years. Good conversation starter for your next party.
Keep in mind too: You had to lose 56% of your money in order to earn a 4.75% return per year. That's why stocks are so challenging for people to hold onto during so many ups and downs.
Tim
Kommentare
timwest
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Here's a (lame) attempt to draw the midpoint between these two markets, assuming you had a portfolio of 50% SPY and 50% TLT.
Crinklebine
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Another unique and interesting chart. Thx.
Crinklebine
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It looks like there were lots of dividends along the way for TLT, but I suppose SPY had a similar dividend payout also.
timwest
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TLT had much higher dividends over the time period, but I think TLT dividends are taxed at a higher rate than SPY. Either way, that's why I left the dividends out. Still very interesting to see the return of a "blended portfolio" which would have had a very small drawdown and the SAME RETURN as owning either one.
SPYderCrusher
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excellent stuff as usual Tim. To my knowledge there is no different in taxation rate between the two. Both are ordinary dividend income taxable at the dividend rate for the your tax bracket.
timwest
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TLT is interest income and SPY is dividend income. I think dividends are taxed at lower rate than interest.
Let me just pull some info Off the web:
The basics: Qualified dividends, as well as capital gains, for individuals in the 25%, 28%, 33% and 35% income-tax brackets will continue to be taxed at 15%. Individuals with more than $400,000 in taxable income—and couples with more than $450,000—will see the rate rise to 20%. If a taxpayer is in the 33% tax bracket, then all of his or her interest income will be taxed at 33%. This rule applies for interest that is both fully taxable at all levels and also for interest that is taxable only at the federal level
timwest
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Here was my comment first in the KEY HIDDEN LEVELS CHAT ROOM where I published this chart first:
"If you were clever enough to move ALL of your money OUT of US STOCKS in 2007 and moved them into 20 Year US Gov't Bonds... You would be up 38% (excluding nice dividends along the way). The same return as the S&P (excluding dividends also)."