S&P 500 Index Fund - July 2019 Report

S&P 500 Index Fund Challenge - July 2019

A little background if you stumbled upon this Challenge Report. I started these challenges in 2018 as a way to show everyday people how investing and saving for your future is as easy as putting a little money aside and growing it using investment securities. As I developed these challenges, I wanted the amount that was saved to be affordable to anybody who was reading these reports. In the S&P 500 Challenge, I commit $65 per month to an S&P 500 index fund. The goal is to keep it there for as long as it takes (30 + years long). This isn’t my retirement plan, but in order for readers to actually see it work, I have to make this longer than just 5 or 6 years. So as long as blogs and websites are still a thing 30 years from now, I’ll keep reporting on it month by month.

Results

As of 7/12/2019 investment date (all S&P 500 investments are made between the 10 - 15th of each month):

Investment Month Number: 18
Amount Invested Each Month: $65.00
Funds: S&P 500 Index Fund
Total Amount Invested: $1,170.00
Total Account Value: $1,287.81
Total Expected Value: $1,229.86*
Total Annualized Interest Rate Return: 13.38%

Commentary

During the past month, the market (S&P 500) increased 4.65%. The increase in the market was due in part to the federal reserve indicating a lower interest rate in the future as part of their June federal reserve meeting minutes and the suspension of tariffs related to China trade. All of these items were seen as a positive for the future economy and markets and therefore shows in the increase in the S&P 500 over the past month.

When we look at our increase in this challenge over the month, we saw an increase of 4.17% which isn’t 4.65%, but there will always be a tracking error between what the actual S&P 500 does and what an index fund does. Some of this difference is due to weighting of how an index fund makes up the S&P 500 index fund versus what the actual S&P 500 does. You will always have a tracking error and investment funds do their best to bridge the tracking error gap. It is also important to note that fees also increase a tracking error and the less fees you pay, the less tracking error you’ll have.

The expense ratio for this S&P 500 Index Fund is 0.02%, which as of July 12th translates to $0.0931 per year for each share own (this is not how you properly calculate fees, but for illustration purpose, this is kind of how it works.).

We ended the month with an annualized return of 13.38% which is definitely better than the expected 9% return we are looking for. As always, we’re looking for long-term returns and not just 18 months worth of returns.

If you want to read more about this challenge, make sure you check out the S&P 500 Index Fund Challenge page here.

To see more of our challenges, click on the challenge name below:

Until August, see you later.

*Total Expected Value Calculation (Using a TVM Calculator)
Annuity Due Calculation - BEG on BA-II PLUS
N = 17
P/Y = 12
I/Y = 7%
PV = $0
PMT = -$65
FV = ? (Calculated to $1,164.86 + $65.00 = $1,229.86)