My Grandma Tootsie

My Great-Grandma Tootsie was born in 1880, 15 years after the end of the Civil War! She lived to be 98 and died when I was 14 so I not only met her but I knew her and remember her well. On the day she died, she picked up some of her younger, 80-something year-old friends in her Studebaker and drove them to lunch – had dessert I’m quite sure, because she wasn’t a vegetarian but a dessert-atarian – went home and took her last nap. It boggles my mind to think of the changes in our ways of life since the late 19th century to now. There has been one, at least, constant over those 141 years: the U.S. stock market has provided outstanding long-term returns for investors, even with the inevitable declines mixed in.

As an example, if Grandma Tootsie had invested $100 in the S&P 500 stock index in the year she was born, it would be worth $31,241,593 in 2021, including reinvested dividends. Of course, according to data collected by Michigan State University the average farm wage in Nebraska, where she lived, in the year she was born was $24.48 per month. So, investing $100 in the stock market was truly a rich person’s game back then. And, to be fair, her theoretical investment in 1880 would have been worth “only” about $250,000 when she died in 1978. Those extra 43 years of compounding makes a difference.

The average annual return of the U.S. stock market as measured by the S&P 500 index during those 141 years was 9.34%. Not too shabby.

Now, it wasn’t always smooth sailing (a poor metaphor for Nebraska, I realize):

• Since the market crash of 1929, the average Bull market period lasted 2.7 years with an average cumulative total return of 111.7%;
• During that same stretch, the average Bear market period lasted 9.5 months with an average cumulate loss of -35.5%;
• In 1980, the largest companies in the S&P 500 included IBM, AT&T, Exxon, Standard Oil, Schlumberger, Shell Oil, Mobil and General Electric;
• In 2021, the largest companies in the S&P 500 include Amazon, Apple, Alphabet (Google), Facebook, Tesla, and Microsoft;
• Over the last 100 years, the stock market has declined, on average, at least 10% once per year;
• During those 100 years, it has increased by about 23,000 times.

To my knowledge, Grandma Tootsie never invested in anything other than maybe a tractor for the farm and chocolate ice cream for herself. Too bad – if one can hang on and not panic during the inevitable downturns, the U.S. stock market remains the best way for most of us to accumulate wealth for our futures…and hopefully our ancestors’ futures as well.

Steve Byars, CFP®