The S&P 500 index currently trades at $7,731, up 0.7 percent today. Since its 1957 inception, the index has generated an average annual total return of about 10 percent, even through ten recessions.
That track record validates Warren Buffett's core thesis: be greedy when others are fearful. The data backs it up.
The index fell 57 percent from October 2007 to March 2009, bottoming at 676.53. A $1,000 investment at that low is worth $11,000 today with reinvested dividends.
The 2020 COVID crash was sharper but shallower—a 34 percent drop to 2,237.40 in March. A $1,000 stake at that low grew to $3,800.
From January to October 2022, rate hikes drove a 25 percent decline to 3,577.03. A $1,000 investment there reached $2,300.
Even buy-and-hold investors who never timed a bottom saw gains. A $1,000 position established at the start of 2007—just before the Great Recession—would be worth about $5,700 today with reinvested dividends.
Buffett, CEO of Berkshire Hathaway (BRKA, BRKB), has made his conviction clear. In his 2013 shareholder letter, he directed his trustee to place 10 percent of his estate's cash in short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. At Berkshire's 2020 shareholder meeting, he advised investors to stomach 50 percent drawdowns—and stay the course.
The S&P 500's quarterly rebalancing—rotating in the 500 largest U.S. companies—ensures it adapts to market shifts and recovers from downturns. For equity portfolios, Vanguard's S&P 500 ETF (VOO) offers low-cost exposure to this core holding.
