How the Sensex, S&P 500 grew between leap years

Here is how the Sensex and S&P 500 have changed from one leap year to another! They did not always beat inflation or fixed income returns!

Published: February 29, 2020 at 11:18 am

On this “extra day” in February which will endow 2020 with 366 days, let us find out how the Sensex and the S & P 500 have changed from one leap year to another and what it can teach us about risk and reward.

On 29th Feb 1980, the Sensex closed at 128.21. Forty years on, it closed at 38,297.29 on 28th Feb 2020. Almost 300 times more and an annualized growth of 15% excluding dividends. The data in the image above is shown below.

Sensex growth between leap years

DateSensex (price)

This is the leap year to leap year annualized returns.

DateAnnualized Return

The 65% window is due to Harshad Mehta related market manipulation. Even in such a short period, we notice multiple single-digit returns. With the exception of 7%, the addition of 1.5% to 2% from dividends will still not be able to beat inflation or fixed deposits.

The argument that “four years is too short” will not help much as risk does not die down in the long term as shown earlier: Dollar Cost Averaging aka SIP analysis of S&P 500 and BSE Sensex and Ten-year Nifty SIP returns have reduced by almost 50%

Merely 11 data points spaced four years apart is enough to highlight the nature of the stock market. Returns and losses are clumped. A big positive return leads to a slowdown and then a big up move, what we refer to as the Sensex Staircase – are you ready to climb?!

You can also imagine in which window the mutual fund industry started to grow rapidly (post-2016) and when it faced a slowdown (2008-2012). Distributors will have you believe that “hand-hold” investors during tough times. There is no evidence of that.

People stop investing during tough times or are not interested in the stock market just when they should be pouring in money!  No advisor, whether distributor or RIA can help investors manage risk unless the investors themselves are mature and invest with a clear goal.

S&P 500 growth between leap years

The S&P 500 offers a much longer history to study leap year movements. Thanks to Prof. Schiller, one can get monthly S& P 500 data including dividends from 1872! Or 37 leap years! This data is inflation-adjusted but for this study, we shall only consider total returns (dividends assumed to be reinvested).

Amusingly the S&P 500 “looks” fairly calm from leap year to leap year (most US presidential elections fall on a leap year) in log scale.

SP & 500 movement leap year to leap year since 1872
SP & 500 movement leap year to leap year since 1872

The returns, however, paint a different picture. The periods of severe recession and unemployment are clearly seen from the real (inflation-adjusted) returns.

Annualized returns of S#P 500 TRI and S&P 500 Real total returns from leap year to leap year
Annualized returns of S#P 500 TRI and S&P 500 Real total returns from leap year to leap year

Just like the cricket or football world cup, a leap is a wonderful life market. Four years ago, in Feb 2016, there was no GST and an Rs. 1000 note was still legal tender! It seems like a short span but many events unfold from one leap year to the next. How was your investment portfolio four years ago? Do you think you manage money better now?

How will the Indian economy evolve in the next four years? How will our portfolios evolve? We will have to wait for the arrow of time to move forward.

Do share if you found this useful

Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 640 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 2525 investors and advisors are part of our exclusive Facebook Group! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 585 salaried employees, entrepreneurs and financial advisors are part of our exclusive Facebook Group! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos in an exclusive Facebook Group!   
My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored three print books, You can be rich too with goal-based investing (CNBC TV18), Gamechanger, Chinchu Gets a Superpower! and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps