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02/05/2009 08:23:59 PM · #1 |
I am well aware it is very difficult to beat an investment strategy made of up a simple index fund. However, like most people, I am a moth drawn to the flame of going my own way. Here's my question. I use a spreadsheet for each year which compares the investments I make with a mirror strategy that invests money in the S&P instead. When comparing the two strategies, how do I account for dividends in the S&P? In other words, I assume that if the S&P starts at 800 on Jan 1st and ends at 880 on Dec 31st, that 10% gain does not include disbursements and dividends given out by the companies.
So what is the best way to compare your own investment strategy with one that just invests in a S&P index? |
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02/05/2009 09:27:53 PM · #2 |
| Net the percentage change in share value with the percentage dividend yield. For example, the S&P 500 return for 2008 was around -38.5% and dividend income was about 1.5%. The yield figure including dividends (“Total Return”) is thus approximately -37.0%. |
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02/05/2009 11:28:47 PM · #3 |
| So where do I find the S&P dividend yield? and it seems like it would get more complicated since I am making investments throughout the year. Would one simply prorate the dividends somehow? |
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02/06/2009 01:44:28 AM · #4 |
In the good old days the dividend yield was considered small enough to just ignore. Or was just considered an unwritten offset to fund expenses. The historical dividend yield range is 1 – 3 percent. Now-a-days that’s significant. And all the rules have changed now anyway.
I can email you a little Excel spreadsheet easier than explaining the calculations. I use the spreadsheet for calculating returns for the Vanguard Index 500 Fund. This fund pays dividends quarterly, so the spreadsheet is setup for that. I don’t bother with estimates/prorating for other time frames.
Email me if you want the spreadsheet.
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