I created a simulation designed to help predict the future returns of SPY (SPDR S&P 500 ETF) looking ahead at various time horizons. The simulation runs involve starting at time = 0 (today) with the made-up price of SPY being $100 per share, then using historical daily returns to modify the price for the needed number of days for the different time horizons. The price at the end of the run represents the real dollar return on 1 share with a basis of $100 per share at time = 0. Each simulation contains 1000 such runs, and the results for the median, the 25th percentile, the 75th percentile, the chances of losing money and the compounded annual growth rate of the median are displayed below:
| Price(median) | Price(25%) | Price(75%) | P(Price<100) | AnnualGowthRate(median) | |
| 1yr | 107.6 | 95.34 | 122.59 | 34% | 7.6% |
| 2yrs | 117.94 | 99.02 | 141.02 | 27% | 8.6% |
| 5yrs | 148.85 | 108.73 | 199.47 | 19% | 8.3% |
| 7yrs | 171.56 | 121.19 | 239.72 | 15% | 8.0% |
| 10yrs | 216.3 | 148.06 | 332.06 | 10% | 8.0% |
Some observations:
- In the long run, expect your SPY position to appreciate at 8% per annum.
- The odds of losing money on SPY diminish as the holding period increases.
- The distributions at all time horizons skew positive; the money you stand to gain if SPY overperforms (75%) is worth more than the money you could lose if SPY underperforms (25%).