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Advances in Investment Analysis and Portfolio Management






Numerous studies have estimated U.S. stock market returns measured by various indexes such as the S&P 500 Index over certain periods. The purpose of this paper is twofold: first we calculate, under certain scenarios, the final total accumulation of a representative individual who invests a certain amount of funds per month during a long investment horizon of say 30 or 40 years. Second, we evaluate the performance of such an investment plan of defined monthly contributions. This evaluation is based on a benefit target and working backwards we compute the necessary monthly contributions. In our calculations we use actual monthly returns of the S&P 500 Index instead of averages obtained from a large sample. We calculate that accumulations of gradual investments over 30 or 40 years are skewed to the right and we also compute the probability that a given percentage of contributions will be sufficient to finance certain retirement benefits.


Author Posting. © Elsevier 2007. This is the author's version of the work. It is posted here by permission of Elsevier for personal use, not for redistribution. The definitive version was published in Advances in investment Analysis and Portfolio Management, vol. 3, 2007,

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Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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