For Richer, For Poorer: 37 Years of Compounding

On April 28, 1989, my wife Suzie and I said “I do.” As we walked out of the church, the S&P 500 was sitting at a modest 309 points. Unfortunately, nobody thought to gift us a pre-funded index fund that day. What we actually received was three toasters, a bread maker, and enough crystal glassware to open a small shop.

But here’s a question worth asking as our anniversaries have stacked up: what if someone had slipped a $10,000 index fund certificate into one of those cards? What would that imaginary gift be worth today? And what would it have felt like to hold it through everything that followed?

By our 5th anniversary in 1994, that hypothetical $10,000, with dividends reinvested, would have grown to around $16,500. A solid 65% total return in five years. Had this been real money, we would almost certainly have concluded we were financial prodigies. We would have been wrong, but the feeling would have been delightful.

By our 10th anniversary in 1999, the imaginary portfolio had ballooned to $56,759. The internet was going to change everything, including, apparently, the rules of mathematics. In the New Economy, who needed a thought experiment when the market was doing the thinking for you?

Between 1999 and our 20th anniversary in 2009, our imaginary investor would have lived through the Dot-com crash, 9/11, and the Great Financial Crisis. Three separate occasions on which selling everything and converting to cash, or in darker moments, tinned goods, would have felt not just reasonable but obvious.

By April 2009, that notional $56,759 would have shrunk to $44,370. A decade of patience, and you’d have less than you started with. In real, inflation-adjusted terms, the purchasing power loss was considerably worse.

The Lost Decade wasn’t a brief wobble. For ten years, the imaginary investor would have had nothing to show for their commitment except a smaller number and a stern lesson in humility. The correct move was to do nothing, which is both the simplest and most psychologically brutal investment strategy ever devised.

Stay the course through all of that, and the brokerage statement on our 30th anniversary in 2019 would have shown a single number worth pausing over: $181,439.

From the 2009 low, that’s a fourfold return in a decade. The Dot-com crash and the financial crisis would have been reduced, in portfolio terms, to a detour rather than a destination. The imaginary investor who did nothing, who didn’t panic, didn’t rebalance into cash, didn’t wait for a better entry point, would be sitting on nearly $182,000 from a $10,000 starting stake.

The maddening truth of long-term index investing is that the “doing nothing” part is not the boring bit. It is the strategy.

Today, as we approach our 37th anniversary, the S&P 500 sits at around 7,165, up from 309 on our wedding day. That original imaginary $10,000 certificate, had it existed and had it been left entirely alone, would now be worth approximately $492,000.

To put that in real terms: since 1989, inflation has risen by roughly 160%, meaning you’d need around $26,000 today just to match the purchasing power of that original $10,000. Our hypothetical investor hasn’t merely kept pace with the cost of living. They’ve grown their stake nearly 19-fold in real terms.

Thirty-seven years of marriage and thirty-seven years of compounding seem to have quite a lot in common. Both reward patience over panic. Both look, in the early years, like they might not be working. And both, if you’re lucky enough to stay the course, have a way of becoming the best decision you ever made