Over the past nearly 100 years, the typical annual return for the stock market has been around 10%, according to the S&P 500.
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What is the average stock market return?
Typically, the annual return on stock markets hovers around 10%, according to the S&P 500 index; however, inflation diminishes that 10% figure. On average, investors may experience a decline in purchasing power of around 2% to 3% annually because of inflation.
To maximize your success in the stock market, focus on long-term investments, which are funds that you can set aside for a minimum of five years. For those seeking to invest over shorter periods, it’s advisable to choose lower-risk alternatives, such as high-yield savings accounts, understanding that this added safety typically results in lower returns.
The average stock market return isn’t always average
Although 10% is considered the typical figure, the yearly returns can vary significantly. From 1926 to 2024, the returns fell within the “typical” range of 8% to 12% on only eight occasions. During the majority of the years, they were substantially below or, more often, well above that range.
Even in periods of market instability, annual returns often remain favorable. While it doesn’t experience growth every single year, historically, the market has increased in value in slightly more than 70% of the years.
5-year, 10-year, 20-year and 30-year S&P 500 returns
Presented here is a chart illustrating the price returns of the S and P 500 across various periods, as of the conclusion of 2022.
The chart indicates that despite a long-term average annual return of 10% for the market, annual returns can fluctuate greatly. The five-year return reflects the rebound following the pandemic and the recovery noted in 2023. Meanwhile, the 20-year return accounts for the impact of the Great Recession, and the 30-year return incorporates the effects of the early 2000s dot-com bubble.
|
Period (start-of-year to end-of-2023) |
Average annual S&P 500 return |
|---|---|
|
5 years (2019-2023) |
15.36% |
|
10 years (2014-2023) |
11.02% |
|
15 years (2009-2023) |
12.63% |
|
20 years (2004-2023) |
9.00% |
|
25 years (1999-2023) |
7.18% |
|
30 years (1994-2023) |
9.67% |
What to expect the stock market to return
While the market offers no certainties, the average of 10% has proven to be quite stable over an extended period.
What level of return can investors fairly anticipate from the stock market at this time?
The response to that greatly relies on recent events. However, a straightforward guideline is this: When recent gains are high, future gains tend to be lower, and the opposite is also true.
In broad terms, when projecting the potential returns on your stock-market investments over time, we recommend anticipating an average annual return of 6%. It’s important to realize that there will be years of both growth and decline. To visualize what a 6% return may translate to based on your intended investment amount, you can utilize NerdWallet’s investment calculator.