Is Microsoft Stock Paying You Enough For The Swings?

You may hold Microsoft (MSFT) stock, or be about to, after its shares jumped more than a third from July through September. If you also hold funds that follow the market, you feel every Microsoft swing on top of theirs. Did five years of holding Microsoft beat simply owning the S&P 500 index?

No: Microsoft Finished Just Behind The S&P 500

Over the past five years, Microsoft stock returned 13.1% a year including dividends. The S&P 500 returned 13.6% on the same basis. So you earned slightly less than the index, and sat through wider swings to get it.

Volatility is a measure of how widely a stock’s daily moves vary over a year. Microsoft’s was 28.2% a year over the past five years, against 17.0% for the index.

Divide the yearly return by the yearly volatility. The result is what each unit of swing has earned. Over the past five years, it is 0.46 for Microsoft and 0.80 for the S&P 500. For each unit of swing,…