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Wednesday, June 19, 2013

Dear Dad

Posted by Anonymous on Wed, Jun 19, 2013 at 11:35 AM

"Father"

The S&P 500 is a stock market index that is commonly used to judge how well and how poorly the market and the U.S. economy have performed. Since we didn't get child support growing up, I will consider that money as good as being saved and invested. I have calculated how much is owed between 1979 and 2013.

Child support payments were $150 per month between July 1979-July 1997 (not factoring increases in cost of living). Starting with the first payment and ending with the last payment all monthly payments shall be contributed to an index fund based off the S&P 500.

Between 1979-1997, the annualized return between those years is 17% for a total of $213,566.00. Since I still didn’t get to spend that money on a new truck, college, or a down payment on a condo, I’ll consider it as still in the market collecting compound interest. Between the years 1997 to 2013 the annualized return is 4.47%. $213,566.00 compounding between 1997 and 2013 would increase to $417,047.53.

These calculations are basic compound formulas and the annualized returns of the S&P 500 are widely considered what one should at least beat in their portfolio or it’s time to find a new money manager. The average is taken right off of the S&P 500’s own charts and is easily accessible by the anyone with a computer.

Regards,

"Son"

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