Imagine two people who added $10,000 to their investment accounts on January 1st, every year for the past 15 years.

One of them is risk averse. They put the money into Certificates of Deposits, getting  a few percentage points each year, but the principal is insured.

The other is less risk averse; they put money into an S&P500 Index each year.

Who comes out ahead? The answer might surprise you:


Stocks vs Certificates of Deposit (1994 – 2008)

click for bigger chart


CDs in 2009 yield 1% – 2%, as the market fell and then rally; if the S&P doesn’t perform well for the rest of this year, CDs will have more gains again.

As of March, Bonds had outperformed Stocks from 1968 to 2009 — 40 years


Thanks, RM!


Stocks vs. Bonds (March 28th, 2009)

Used the CDs 6 mo (Annual) data from here:

Used the annual returns (with dividends) from here:
(did each year gain/loss seperate, then added the $10K for the next year)

Category: Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

148 Responses to “S&P500 vs CDs (1994-2008)”

  1. going broke says:

    @ Andy T.
    The stock market is designed to make wall streeters rich, plain and simple, it’s just legalized gambling. They change the rules whenever needed to keep their profit inflow. The only reason I play the game… my company matches 50% on the dollar invested up to 8% of my salary/yr. Recently I tried to reallocate some of my funds in the 401K, they wanted to penalize me because my 90 day waiting period wasn’t up.

    About the no stock market… they’d create a savings market… it would not be free of charges to save anymore.

  2. constantnormal says:

    @ben22 4:16 pm

    I understand where you are coming from. Thanks. Sometimes (usually) words can be interpreted in more than one way. I’ll be more careful to clarify my meaning in the future (at least the intent is there at this moment :)

  3. constantnormal says:

    @ben22 4:16 pm

    Thanks for the link — I’m sending it to my kids.

    But I never thought anyone expected or relied on an inheritance … it strikes me as foolish as buying lottery tickets. I guess people do, though.

  4. ben22 says:

    @going broke,

    That’s a nice match on your 401k. You are lucky, lots of companies that were offering that large of a match before aren’t anymore. The 90 period is basically in every 401k, doesn’t make it any better but everyone has to deal with that now. I’d pay the fee any day before I sat around in a shit fund taking a bath.

    On another note to all:

    People here do realize that most brokers fail out of the business right? It’s not like you work on wall st. and automatically make a million a year. I love the market, I’d be crushed if it went away, not to mention out of a job. Anymore, I think it might be the only meritocracy left in the states.

  5. ben22 says:


    lol, you have no idea how many people expect and rely on inheritance. I get prospects in the office all the time that have done zero to plan for future financial events such as college or retirement but they are always certain to tell me how much they will inherit. I don’t even bother asking anymore what happens if they don’t get it.

  6. I-Man says:

    @ B22:

    “I think it might be the only meritocracy left in the states.”


    Thats what got me in this game homie. Meritocracy.

  7. ben22 says:


    you and me both, exactly what I liked best when I got into this. I knew it didn’t matter that I went to a Big 10 school and most of the guys I started with went to an Ivy. I started with a group of 18 people, there are 3 of us left a little over 7 years later.

    You get out of this job exactly what you put into it.

  8. Whammer says:


    I was in Venice for a couple of days last week and within 15 minutes I heard some American tourists ask where the Hard Rock Cafe was, and then I heard other American tourists cheer when they saw the HRC. I must admit that I have gone to some of those places in weak moments, but not in a long time…..

    Hey cvienne, way OT, but what do you know about the Palio in Sienna? That isn’t too far from your old stomping grounds, I’m thinking.

  9. I-Man says:


    I used to apply that meritocracy theme to my dreams of someday being some badass prop trader at GS, MS, or JPM… or some hedge fund like Citadel…

    Funny, now those cats I consider my enemies, and I have no desire to ever do what they do.

    Now I just apply the meritocracy ethic to my own trading… and hope to someday be more of a Ed Seykota or Bill Dunn.

    Funny stuff… dreams they are.

  10. Thor says:

    All – thanks for the book recommendations. Ben – cool story. I would agree with it as well. I doubt the baby boomers are going to have enough money for their own retirement, never mind leaving anything to their kids.

  11. Whammer says:

    @Ben — that article about inheritance is amazing. I just inherited a little from my mom, about $45K or so. I had no idea that I was in the top 8% or whatever…..

    Especially since my parents were blue collar, never made any money to speak of. Frugal, though!

  12. ben22 says:


    We’ve got an awful lot in common.

    My wife and I went to Jamaica on our honeymoon last year. Probably another place we’d both enjoy besides in front of the trading screen.

  13. Thor says:

    Whammer – I travel all over the world and am surprosed to hear you say that. I pay particular attention to Americans and how they act when I travel, I would have to say that the myth of the “typical” American tourist is just that – a myth. Compared to the English (loud and drunk) the Germans (cold and cheap) and the French (cheap and rude) I would say most Americans are good tourists. There are also several international travel surveys done on tourists around the world and how they compare to eachother. Americans are usually rated toward the top (we tip and are generally polite). The French and Germans are always among the worst.

  14. ben22 says:


    Pretty crazy isn’t it. You know lots of these accounts that will eventually be inherited just got a major downsizing in the last 18 months as well.

    This was a good quote from that article:

    Your inheritance “could even be negative if you end up taking care of your parents,” said Kotlikoff, a professor of economics at Boston University.

    This is what I was talking about with the whole Keynes quote above.

  15. I-Man says:

    I wonder if Leftback and Karen are on some secret cruise together… havent heard much from either lately…


    That should pull the Mistress out of hibernation…

  16. frizzione says:


    FWIW waiting for bounce high 13′s-14.00 to add to zsl, which we began when slv broke 15 (but if you believe 8′s inevitable, even starting now 13 to 8′s still a good move, yes).

    i think you’ll go far in this profession, and by starting as young as you have (instead of, say, after failing as a telephone equip salesman – or waitress) you’ll have the advantage in 30 years of having real experience in real markets. but, i’m a little worried about you, ’cause of a heavy – exclusive? – reliance on ew publications (based on your postings). if you don’t already follow them, i suggest adding lowry’s and russell. i watched a number of colleagues who rely heavily on one analysis get slammed last fall waiting for that ‘last rebound’ – and are afraid they’ll do it again waiting to hit 50% retrace (965-1000). if you think things will eventually be significantly lower, and that we’re closer to top than bottom, why not build positions (re your comment, admire shorts but haven’t taken positions yourself yet)? isn’t it better for your clients that they sit through 8-10% potential drawdown on way to significant profits than that they be on the sidelines if (when) some brown-swan days hit? i’m not willing to bet things haven’t begun, especially with lowry’s selling pressure level yesterday.

  17. ben22 says:


    Way OT but I figured I’d share. I started on the P90X program two weeks ago. The first week was brutal but it’s getting a little better as I go.

  18. call me ahab says:


    you’re cracking me up dude- maybe you just never bumped into any “cool” French, Germans or Brits- also-

    American’s do tip- but in most countries the servers receive a living wage and tips are of minor concern- so when we tip our standard 15 to 20% the server is quite pleased- it would seem servers all over the world would be tripping over each other to have Americans at their table

  19. Thor says:

    Ben22 – good for you, that workout program is very good, stick with it, especially the diet portion and you’ll get the results you see in the video (no joke). We’re about to release a new program called Insanity that is even harder than P90x so when you finish that you can step it up a notch!

    Ahab – heh, I was talking about general perception, not entire populations. You’ve traveled a lot as well, what are your perceptions on various international tourist?

  20. I-Man says:

    Oh wow Ben… it gets deeper.

    I’ve been sweating that set of P90X DVD’s for a year now… but Mrs I-Man wont let me buy it. She’s against buying infomercial shit unless of course its crappy kitchen gadgets… ie: the quick chop, the garlic wheel, or the magic bullet… but we’ll let that slide.

    Instead, I’ve been doing this Navy Seals calisthenics training program that focuses on running, calisthenics, and swimming.

    Theres a Stage 1 and Stage 2. I’m still in Stage 1. Pretty brutal too… Its 9 weeks each. But I like actually like it alot. For some reason its been easier for me to keep up with. We’ll see how I feel when the runs start getting longer. Check it out if you’re into that stuff. There’s something about trading and diet/exercise… I think its really important for mental balance.

  21. call me ahab says:

    Thor- to tell you the truth- I bumped into folks from all over- even hooked up with a dude from Cameroon to check out the summer palace in Beijing- but I do not remember bumping into any Americans- but then again- maybe I wasn’t paying attention- but I was mostly low rent- staying in hostels and whatnot- heavy drinking was the norm-

    I think many may have thought I was a bit on the strange side. The absolute friendliest person I met was in Budapest- a Ukrainian- that guy could keep anyone entertained.

  22. ben22 says:


    You never went for pro bikini contest? lol.

    how odd, I just added russell last week for the reason you talk about above, I’m too central on one thing right now. Even BR warned me about that. I read Faber and Grantham as well, and Doug Kass’ free stuff @ The Street and handful of blogs but mainly EW stuff. Plus I read the comments of certain people here for trading ideas. All the stuff my company puts out is junk. Lowry I never checked out but now I will. Do you follow McClellan at all?

    Also, thanks for the kind comments, I hope to do well over time, I’ve had a little bit of success so far but I want a better mentor to work under for a while so I can learn more which is why I’m looking to get out of my current set up and move to working under someone or as an RIA. I’d prefer to work under someone for a while, I’d rather be the tail of a lion than the head of a fox.

    As for client money, my clients have virtually no stock market exposure at all right now. The stocks I had bought for people late last year were sold when the S&P hit 930. I didn’t care at that point if I missed the last 10% of the move up and my clients didn’t take a pounding last year so we weren’t playing catch-up. I think you give a good tip there but I’m not allowed to solicit short ETFs anymore though to clients (seriously), leverage or not, new company rule, I had a whole strategy put together for this that I developed over 2 months and I had limit orders set up on SH for over 100 clients and my home office went in and shut them all off!!!!) Also, where I work it is hard to get options approval and I’m not a huge fan of the short mutual funds. I’m not going to put my career at risk by marking them unsolicited so instead I just ended up telling clients to use a lot of treasury ETF’s which have done fine since purchase.

    The trades I mention on here it’s my own money not what I do for clients, I do stuff in my own accounts that I either can’t do for clients on a large scale due to trading platform restraints and more important I take risks I would not recommend for most of my clients. I’m not short yet because when I do it, I’ll make a very large move and I don’t care about hitting the very lowest price when I buy based on what I think is coming. I would bet that in any given year I’m only invested half the year. I’m up pretty big for the year mainly working on the long side so for now I’m just gonna sit tight with cash and make trades here and there, for now I’m just too up in the air on the short term direction to get religion on the short side.

    I screwed up with the ZSL and sold it too quick thinking how smart I was by taking a quick 20% on the ultra’s. Every time I do something I think is brilliant it turns out not to be. I ended up buying it back and am just holding it right now, gonna try to trade a few stocks on the long side as we get into earnings season.

  23. ben22 says:

    sorry for such a long post

  24. ben22 says:


    I shit you not but I did that workout a few years ago. Crazy. I stopped it b/c I tore my ACL playing basketball and the running is tough as I’m mainly on concrete and I do not enjoy running on a treadmill. Also, at the time I did it I was living in an apartment that had a pool. No pool at the house I bought.

  25. Whammer says:

    @thor — I didn’t mean to imply that they were “ugly Americans” because they liked the Hard Rock Cafe. I was more reacting to ahab’s comments about the Bubba Gump in New Orleans. To me, going to eat at the Hard Rock Cafe in Venice just seems dumb.

  26. frizzione says:

    ben22 – 20% profit’s never a dumb idea, especially if you’ve lived long enough to have lost a lot more than 20% being “smart”. and, i applaud you staying in the pew – no need to head to the altar until it’s real for you. sounds like you need to get out of the wirehouse system asap, though it was a very good place to start. watch out, though – some indie b/d’s are placing restrictions, too, though none as onerous (yet) – one of the biggest just banned 3x funds. Not that avoiding 3xs is a bad idea for retail, but it’s a slippery slope. If you go pure RIA, load up on really good E&O.

  27. Thor says:

    Whammer – sorry about that, I have a bad habit of coming to the defense of the average American. I’ve been trying hard to tone that down but every once and awhile I slip up ;-)

  28. Thor says:

    Whammer – Part II – I know exactly what you’re talking about too. I am not at all adventurous when it comes to food. There are places that I’ve been where I’ll admit I’ve spent more time eating Mc Donald’s than the local cuisine.

  29. call me ahab says:


    assuming you are talking about Venice Italy and not Venice California (which I have secret love for) I don’t remember ever seeing a Hard Rock?- I saw a Mcdonald’s (I think, I get it confused with Amsterdam) – but I don’t remember any other American restaurants- and I wandered around there for a few days

  30. Whammer says:

    ahab — yes Venice Italy. I think the Hard Rock there is probably pretty new — I can testify to its existence. And yes, there is at least one McDonald’s in Venice also.

    @thor — when I was traveling a bit in the former Yugoslavia before it broke up, I started to frequent the McDonald’s in Belgrade because at least they weren’t trying to rip me off, which was the feeling I got at just about every other restaurant there. Plus, they had the cleanest places to poop ;-)

  31. Thor says:

    Ahab- they closed down the Hard Rock here a couple of years ago, not sure why they decided The Beverly Center would be a good place for a HR, not too many people come to LA to go to the Mall. They’re going to re-open it next to Grauhmans Chinese though.

    Whammer – I tend to go to Mc D’s because it’s pretty consistent around the world. Some countries I’ve been fine eating local food in (Poland, Hungary, Romania) but others were too “exotic” for my bland tastes – Russia, Morocco, etc.

  32. some_guy_in_a_cube says:

    Slow and steady wins the race.


    Didn’t you children learn that way back in nursery school???

  33. kn says:

    so with equities underperforming, how are the mutual fund / long only co’s that have been pushing their higher free equity funds going to justify to their clients the current recommended asset allocation (which I argue is too geared to equities)? jack up fees on fixed income?

  34. Pat G. says:

    You know, I thought about this more as the day wore on. Want to kill two birds with one stone? We should start a national movement where ordinary citizens start pulling their money out of the major banks and putting it into smaller ones or savings and loans in their local area. The big banks, with their big bailouts are being subsidized by the USG causing all the local mom and pops to shut down and lay off our neighbors because they can not compete. Open up CDs with that money and if you trade out of any positions along the way, get more CDs. Wall Street and the USG, with its liars, connivers, cheats, thieves, crooks, inside traders and bedfellows have proven in spades, that neither have the morals necessary to manage this country or even our money for that matter. I think of it as poetic justice…

  35. Eric K says:

    ben22 – you should check out Glenn Neely’s EW analysis (NEoWave) too since he predicted that the DJIA would continue to rally in the late 1990s while Prechter wrote in At the Crest of A Tidal Wave that the “the best intpretation of the data says the Dow will not continue to 10,000 without first falling to one-tenth that level or lower.” (p 78)

    Neely argues that the 2000 high was the end of wave SuperCycle 3, while Prechter believes it was the end of wave 5. Prechter’s count shows wave SuperCycle 3 ending in 1929, but that means that 3 of 3 was between 1890 and 1910, which did not show typical 3-of-3 behavior. Since that count led Prechter to miss the 1996-2000 bull market, he could also be wrong predicting that we’re in wave 2 of a bear market. Neely argues that 956 was the high of the year and that we’ll see the final low of the bear market within the next 6-7 months below 500, but that will be the low of the next 75 years! Now _that’s_ a generational low. It would also match up with the lows seen on the q-ratio and Shiller 10 year P/E lows from 1932, 1942, 1949, 1974, and 1982.

  36. cvienne says:


    I’ve been away at the gym for awhile so I just picked up your post…

    The palio in Siena is a classic…I’ve been to it a couple of times…Siena is only about an hour ride from Perugia…

    Those jockeys are nuts! It takes them 20 minutes sometimes to line up the horses on the line…

    It’s like the Kentucky Derby Rennaissance Fair style…

  37. cvienne says:

    @Eric K

    I’ve got to look into this Neely guy…

    His calls sound EXACTLY like the ones I’ve been compiling (through various means) for awhile now…

    I wrote Andy T an e-mail late last night and laid out my theory…

    Oddly, we both came out to the same numbers through entirely different methods…So there’s gotta be something to this…

  38. cvienne says:

    @Eric K

    What amazed me most is HOW I came up with the idea that 956 was the TOP for ’09…That, of course, has yet to be proven…but I’m pretty convinced…

    It was purely by accident…I was plugging in a lot of different models and that just popped up…& the market has traded technically PERFECT since then, so….so far so good…

  39. Eric K says:

    Andy was the one who sent me this press release from Neely:

    I noticed last December that once SPX broke down below 1000 in June 2002, it didn’t get above 965 until June 2003 — the Aug 02 high was 962 and the Dec 02 high was 950. That’s what made me expect we’d sell off from the Jan highs. Like 2008, 2002, 2001, and 2000, I think the market will move sideways until September and then sell off hard.

  40. ben22 says:


    I have heard of Neely but never really read any of his stuff. I’m going to check him out, thanks much.

  41. [...] CDs vs. S&P: Barry Ritholtz of the Big Picture makes an interesting investment comparison. “Imagine two people who added $10,000 to their investment accounts on January 1st, every year for the past 15 years. One of them is risk averse. They put the money into Certificates of Deposits, getting a few percentage points each year, but the principal is insured. The other is less risk averse; they put money into an S&P500 Index each year. Who comes out ahead? CDs in 2009 yield 1% – 2%, as the market fell and then rally; if the S&P doesn’t perform well for the rest of this year, CDs will have more gains again. As of March, Bonds had outperformed Stocks from 1968 to 2009 — 40 years.” [...]

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