Albert Einstein once stated, “Compound interest is the most powerful force in the universe.” This theory is highlighted by the contribution from dividends and compounding to the long-term performance of the S&P 500.
The S&P 500 is widely regarded as one of the best gauges for the large-cap U.S. stock market. Dating back to the start of 1957, the price return of the S&P 500 is over 8000%. The total return which includes the impact of dividends and compounding is over 50000%. Approximately 80% of the hypothetical total return that an investor would have earned over this long period is attributable to dividends and compounding.