Why S&P 2,000 Is Just Another Milestone on Your Road to Riches

Many will make a big deal out of the new mark, but for long-term investors, it's just another step on the path to prosperity.

Aug 25, 2014 at 3:49PM

On Monday, the S&P 500 (SNPINDEX:^GSPC) crossed the 2,000 mark for the first time, drawing huge amounts of attention from media outlets celebrating the staying power of the 5-year-old bull market. Yet despite all the hype about S&P 2,000, events like this are no more than milestones for long-term investors, who recognize that in the context of decades of investing, similar achievements come and go like clockwork.

Source: Flickr user thetaxhaven.

How stock market milestones became a dime a dozen

Over time, round-number marks in the S&P 500 and the Dow Jones Industrials (DJINDICES:^DJI) have become much more commonplace, to the point where they almost seem like everyday events. For instance, it took the Dow less than 14 months to cross three different thousand-point barriers for the first time, hitting 15,000 in May 2013, 16,000 last November, and 17,000 early last month.

The S&P 500 has climbed at an even faster rate, breaching hundred-point levels along the way: It hit 1,600 for the first time just 15 months ago, 1,700 less than three months after that, 1,800 nine months ago, and 1,900 barely three months ago.

It wasn't always like this. For instance, it took the Dow 15 years to rise from 1,000 to 2,000. Similarly, for the S&P 500 to double from 100 to 200, investors had to wait from 1968 to 1985, going through both the big bear market of the mid-1970s as well as the inflation-heavy period of the late 1970s and early 1980s.

But the past few years don't mark the first period to see a rapid-fire series of milestones. During the 1990s, stocks soared alongside the technology industry, and the Dow crossed eight successive thousand-point levels in less than five years.

Source: Marcy Hargan via Flickr.

Keep your perspective

Now that the S&P 500 has touched the 2,000-point mark, you'll hear endless debate about whether the stock market index will be able to sustain that level and keep rising. You'll hear comments from both sides about whether the market can continue to advance or whether a long-overdue correction will send stocks sliding from their new heights. Much of the discussion will focus on short-term issues and the potential impact of the next big news item on investor sentiment and the major market benchmarks.

But the real power of the stock market shows itself not in these milestone events but rather in the inexorable progress that investors make in building wealth. Over the past 50 years, the average annualized return for the S&P 500 has been right around 10%, and money invested back then has grown more than 100-fold in the process.

^SPX Chart

S&P data by YCharts.

Along the way, investors have had to deal with the inevitable ups and downs of the market, so not all of the money you've invested has earned that 10% figure. If you invested near the top of the market in 2000 or 2007, your returns have looked anemic by comparison, even with the S&P 500 at record highs. If you invested at the bottom of the market in 2009, then you've tripled your money in just over five years, crushing the long-term average.

Regardless, the earning power of the S&P 500 has helped millions of investors in their quest to become financially independent. In that light, today's S&P 2,000 mark is worth noting -- just as you might notice when the odometer on your car passes through a big milestone. But when that happens, you don't stop driving. Nor should you stop investing with the S&P at 2,000. Those who stick with the market for the long run will likely see many similar milestones in the future -- even if it's impossible to predict exactly when.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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