Stock Market Average Return

The last decade was good for stocks. Average annual stock market return for the S&P 500 index (SNPINDEX:^GSPC) was 14.8% from 2012 to 2021. The returns vary greatly from year to year, and a “average” year rarely yields the average return.

Only 2014 came close to the 14.8% average annualized return throughout that decade. The catch? None knows which years will be above or below normal. This is where the one-year average only helps establish stocks as long-term assets.

Stock market average returns
When people say “the stock market,” they mean the S&P 500. A stock market index, the S&P 500 includes just over 500 of the top publicly traded U.S. corporations. Quarterly updates and major changes occur annually. While many more stocks trade on U.S. stock exchanges, the S&P 500 represents 80% of the stock market’s value, making it a good proxy for market performance.

The market’s performance might fluctuate greatly from year to year. Example: 2012-2021

Dropping 4.4%: 1 year
Up 2% or less: 1 year
Over 20% increase: 4 years
Up 12%–19%: 4 years
Six years of that decade had results considerably different from the 14.8% annualized average return. Two of those six years had lower returns (2018 lost money), while four had higher returns. Two of those years—2013 and 2019—produced returns of above 30%, offsetting the below-average years.

 

Average 10-, 30-, and 50-year stock market returns
We’ll use the S&P 500 to examine the stock market’s average annualized returns over the past 10, 30, and 50 years.

The difference in annual returns from year to year vs the average is noteworthy. Here are the annual results since 1972:

Returns over 20%: 19 years
10%–20% returns: 13 years
Nine years, 0%–10% returns
Four years, 0%–10% losses
Two years for 10%–20% losses
Over 20% losses: three years

Stock returns vs. inflation
In addition to average returns, the table above displays inflation-adjusted stock returns. A 1972 $1 investment is worth $46.69 now.
However, $46 doesn’t have 1972’s spending power. To account for inflation, $46 will buy the same goods and services as $6.88 in 1972.

 

 

The last decade was good for stocks. Average annual stock market return for the S&P 500 index (SNPINDEX:^GSPC) was 14.8% from 2012 to 2021. The returns vary greatly from year to year, and a “average” year rarely yields the average return.

Only 2014 came close to the 14.8% average annualized return throughout that decade. The catch? None knows which years will be above or below normal. This is where the one-year average only helps establish stocks as long-term assets.

The difference between the initial price of an item and its dollar value after ownership ends is called returns.
An infographic about stock market average returns, volatility, and best practices.
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Stock market average returns
When people say “the stock market,” they mean the S&P 500. A stock market index, the S&P 500 includes just over 500 of the top publicly traded U.S. corporations. Quarterly updates and major changes occur annually. While many more stocks trade on U.S. stock exchanges, the S&P 500 represents 80% of the stock market’s value, making it a good proxy for market performance.

The market’s performance might fluctuate greatly from year to year. Example: 2012-2021

Dropping 4.4%: 1 year
Up 2% or less: 1 year
Over 20% increase: 4 years
Up 12%–19%: 4 years
Six years of that decade had results considerably different from the 14.8% annualized average return. Two of those six years had lower returns (2018 lost money), while four had higher returns. Two years—2013 and 2019—produced returns of over 30%, offsetting the below-average years.

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Average 10-, 30-, and 50-year stock market returns
We’ll use the S&P 500 to examine the stock market’s average annualized returns over the past 10, 30, and 50 years.

Data from MoneyChimp.
NOMINAL ANNUALIZED RETURNREAL RETURN (INFLATION-ADJUSTED)Nominal $1 becomes…INFLATION-ADJUSTED $1 BECOMES…
10 years (2012-2021)14.8% 12.4% $3.79 $3.06
1992–2021.9.9% 7.3%$11.43 $5.65
50 years (1972-2021)9.4% 5.4%$46.69 $6.88
The difference in annual returns from year to year vs the average is noteworthy. Here are the annual results since 1972:

Returns over 20%: 19 years
10%–20% returns: 13 years
Nine years, 0%–10% returns
Four years, 0%–10% losses
Two years for 10%–20% losses
Over 20% losses: three years

Stock returns vs. inflation
In addition to average returns, the table above displays inflation-adjusted stock returns. A 1972 $1 investment is worth $46.69 now.

However, $46 doesn’t have 1972’s spending power. To account for inflation, $46 will buy the same goods and services as $6.88 in 1972.

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Buy-and-hold investing
The split of annual outcomes versus the average shows that long-term investors are more likely to receive the best returns. There is no reliable technique to anticipate which years will be strong and which will underperform or lose.

Historical data shows that the stock market has risen more than fallen. The S&P 500 has returned 9.4% annually for 40 of the past 50 years. However, only a few years were within a few percentage points of the average. Many more years underperformed or beat the average than were close.

What should someone do? High-quality stocks should be bought routinely across all market conditions and held for years. The data is strong that investors who trade short-term moves or purchase and sell based on short-term peaks and bottoms generate below-average returns. Additionally, those tactics take more time and effort. They can also increase fees and taxes, reducing gains.

Stock investing is a great way to grow money. However, the greatest stock investment strategy is to buy good equities and keep them for as long as possible.

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