Stocks vs. Gold and Silver

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Interpretation

Which was the best investment in the past 30, 50, 80, or 100 years? This chart compares the performance of the S&P 500, the Dow Jones, Gold, and Silver. The Dow Jones is a stock index that includes 30 large publicly traded companies based in the United States. It is one of the oldest and most-watched indices in the world. The S&P 500 consists of 500 large US companies, it is capitalization-weighted, and it captures approximately 80% of available market capitalization. For these reasons it is more representative of the US stock market than the Dow Jones. Both versions of these indices are price indices in contrast to total return indices. Therefore, they do not include dividends. Including dividends leads to a very different picture, which is demonstrated in the chart below.

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Total Return Stock Index vs. Gold and Silver

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Interpretation

In contrast to the S&P 500 Price Index and the Dow Jones, the Wilshire Large-Cap is a total return index, in which all resulting cash payouts (including dividends) are automatically reinvested back into the fund itself. Therefore, it includes all capital gains and it allows for an accurate performance comparison with Gold and Silver.
Unfortunately, the Wilshire Large-Cap only dates back to 1978. For this reason I calculated the S&P 500 Total Return from 1871 until 1977 based on Robert Shiller's data and added it to the Wilshire index. Both indices are very similar. While the S&P 500 includes 500 companies, the Wilshire Large-Cap includes 750 companies. Both indices are capitalization-weighted and both indices are considered benchmarks for large-cap stocks.

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