Investing by the Block

There was a fascinating graphic in the New York Times over the weekend, looking at returns from the S&P 500 over various periods of years since 1920. In this case, the researchers looked at every possible combination of when you could have put your money into the market and when you could have taken it out. So they have calculated the returns for people who invested in 1935 and withdrew in 1952, for example, as well as nearly 4,000 other combinations of years.

The best 20-year period since 1920? That would be money invested in 1948 and withdrawn from the markets in 1968. Accounting for dividends, inflation, taxes and fees, an investor in that time frame would have made 8.4 percent a year. The second-strongest 20-year period was from 1979 to 1999, when an investor could have made 8.2 percent a year. This was the time in which many of us came to learn about investing, and for a lot of people, 8 percent a year came to be seen as a reasonable, expected return. We know now that that isn't the case.

The worst 20-year period in the study stretched from 1961 to 1981, when investors could have expected to lose an average of 2 percent a year. More recently, of course, we've had more bad news: Anyone who invested in 1995 or later, then took their money out of the market in 2007, was likely to end up losing on their investment.

To see the entire graphic, click here.