How Wall Street Parasites Have Devoured Their Hosts, Your Retirement Plan and the U.S. Economy

[progree]

41. Vanguard's S&P 500 Index Fund up 58 fold since inception (8/31/76)

Not all funds are 1 to 2% annual expenses. Vanguard, which is member-owned, has 0.17% annual expense on its domestic index funds (minimum investment $3,000). The annual expense (expense ratio) drops to 0.05% with a $10,000 minimum investment. And no purchase or selling cost.

Take VFINX, Vanguard's S&P 500 index fund -- a passive fund that seeks to emulate the S&P 500 index. It curently has a 0.17% expense ratio (minimum investment: $3,000). (With a $10,000 minimum investment you can get into VFIAX, Vanguard's Admiral Class S&P 500 index fund, with a 0.05% expense ratio).

Back to VFINX:

http://www.thestreet.com/quote/VFINX.html

Since inception 8/31/76: 11.00% average annualized total return, last update: 8/31/15 close.

So in the 39.00 years between 8/31/76 and 8/31/15, the S&P 500 has had a 11.00% average annualized return

Which means it grew by 1.1100^39.00 = 58.56 fold ("^" is exponentiation)

Meaning $20,000 invested in the fund back then would be $1.171 MILLION now

Something that grows at the rate of 11.00%/year on average doubles on average every 6.64 years: 1.1100^6.64 = 2

Note, this isn't some "hot" cherry-picked mutual fund. It is a plain vanilla index fund that follows the S&P 500 Index as close as it feasibly can. I only pick it because it is the oldest such fund I know of. And it is a very broad index of U.S. stocks -- it is 75% of the U.S. stock market by market capitalization.

And because investing in an S&P 500 index is the "default" choice for one's core equity investment recommended by most financial advisers and financial pundits, at least from what I've seen and read. And Warren Buffett, generally considered the world's greatest investor.

A small cap index fund or a value index fund would have done even better during this period.

Nor is this the return only an insider would get. Nor is this some theoretical return before expenses. The fund's returns shown above are net after expenses. This is the return a Joe/Jane Sixpack would have achieved if he/she had put money in at inception and left it alone (with dividends and capital gains distributions reinvested).

As for bear markets: for long-term investors, bear markets are just statistical noise.

Please also see my #34 where I debunk the false statement that "as Frontline revealed, that two-thirds of your 401(k) plan over a working lifetime is likely to be lost to financial fees". Frontline said no such thing.