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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)

Martel
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2 Answers2

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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.

Dugan
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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:

Bob Baerker
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