The past decade has been great for stocks. From 2012 through 2021, the average stock market return was 14.8% annually for the (SNPINDEX:^GSPC). The returns can -- and do -- vary wildly from one year to the next, and an "average" year almost never actually generates the average return.
Over that decade, only one year, 2014, was close to the 14.8% average annualized return. The catch? Nobody knows which years will be above or below average. This is where the one-year average is helpful only in setting the stage for stocks as good long-terminvestments.
Definition Icon
Returns
Returns are the difference between the initial price of an asset and the dollar value that has been generated after ownership has ended.
Image source: The Motley Fool
Average stock market returns
Average stock market returns
In general, when people say "the stock market," they mean the S&P 500 index. The S&P 500 is a collection -- referred to as a stock market index -- of just over 500 of the largest publicly traded U.S. companies. (The list is updated every quarter with major changes annually.) While there are thousands more stocks trading on U.S. stock exchanges, the S&P 500 comprises about 80% of the entire stock market value on its own, making it a useful proxy for the performance of the stock market as a whole.
The market's results from one year to the next can vary significantly from the average. Let's use the 2012-2021 period as an example:
- Down 4.4%: 1 year
- Up 2% or less: 1 year
- Up more than 20%: 4 years
- Up between 12% and 19%: 4 years
To put it another way, six of those 10 years resulted in outcomes that were very different from the 14.8% annualized average return over that decade. Of those six very different years, two generated significantly lower returns (with one year, 2018, resulting in losses), while four years delivered substantially higherreturns. Two of those years -- 2013 and 2019 -- generated returns of more than 30%, helping to make up for the years that saw below-average returns.
10-year, 30-year, and 50-year average stock market returns
10-year, 30-year, and 50-year average stock market returns
Let's take a look at the stock market's average annualized returns over the past 10, 30, and 50 years, using the S&P 500 as our proxy for the market.
Data source: MoneyChimp.| Period | Annualized Return (Nominal) | Annualized Real Return (Adjusted for Inflation) | $1 Becomes... (Nominal) | $1 Becomes... (Adjusted for Inflation) |
|---|
| 10 years (2012-2021) | 14.8% | 12.4% | $3.79 | $3.06 |
| 30 years (1992-2021) | 9.9% | 7.3% | $11.43 | $5.65 |
| 50 years (1972-2021) | 9.4% | 5.4% | $46.69 | $6.88 |
It's worth highlighting the variance in annual returns from one year to the next versus the average. Since 1972, here is a breakdown of the yearly results:
- Returns of 20% or more: 19 years
- Returns between 10% and 20%: 13 years
- Returns between 0% and 10%: nine years
- Losses between 0% and 10%: four years
- Losses between 10% and 20%: two years
- Losses of more than 20%: three years
Stock market returns vs. inflation
Stock market returns vs. inflation
In addition to showing the average returns, the table above also shows useful information on stock returns adjusted for inflation. For example, $1 invested in 1972 would be worth $46.69 today.
But, in spending power, $46 isn't worth what it would have been in 1972. Adjusting for inflation, that $46 will buy the same amount of goods or services you would have been able to buy with $6.88 in 1972.
What Is a Good Return on Investment?You invest to get a return. So what makes a good ROI?
How to Calculate Holding Period ReturnTotal return gained or lost in a time period helps investors measure return.
How Many Shares Should I Buy of a Stock?So you've found a company to invest in. How many shares should you buy?
Buy-and-hold investing
Buy-and-hold investing
If there's any one lesson we can take from the breakdown of annual results versus the average, it's that investors are far more likely to earn the best returns by investing for the long term. There's simply no reliably accurate way to predict which years will be the good years and which years will underperform or even lead to losses.
But we do know that, historically, the stock market has gone up more years than it has gone down. The S&P 500 gained value in 40 of the past 50 years, generating an average annualized return of 9.4%. Despite that, only a handful of years actually came within a few percentage points of the actual average. Far more years significantly either underperformed or outperformed the average than were close to the average.
What's a person to do? Buy high-quality stocks, ideally regularly across every market condition, and hold those investments for many years. The evidence is overwhelming that investors who try to trade their way to higher returns with short-term moves or buy and sell based on projections of short-term peaks and bottoms generally earn below-average returns. Moreover, those strategies require substantially more time and effort. They can also result in higher fees and taxes that further reduce gains.
If you're looking to build wealth, investing in stocks is an excellent place to start. But to get the best returns in stock investing, use the method that's tried and true: Buy great stocks and hold them for as long as possible.
Mike Price has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
FAQs
The stock market has returned an average of 10% per year over the past 50 years. The past decade has been great for stocks. From 2012 through 2021, the average stock market return was 14.8% annually for the S&P 500 index (SNPINDEX:^GSPC).
What is a realistic stock market return? ›
The average stock market return is about 10% per year, as measured by the S&P 500 index, but that 10% average rate is reduced by inflation. Investors can expect to lose purchasing power of 2% to 3% every year due to inflation. » Learn about purchasing power with the inflation calculator.
Are Motley Fool portfolios worth it? ›
Motley Fool Stock Advisor can be worth it for investors who value the potential returns and stock picks as comprehensive investment guidance. Prospective subscribers should weigh the cost against their investment goals and the potential for portfolio growth.
What is the average return of the stock market in 2024? ›
As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.
What is the Motley Fool stock advisor 5 year return? ›
Motley Fool Stock Advisor Performance
139% for the S&P 500. Past 10 years: Average return of 292% vs. 186% for the S&P 500. Past 5 years: Average return of 79% vs.
Is 7% return on investment realistic? ›
General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation. However, a strong general ROI is something greater than 10%. Return on Stocks: On average, a ROI of 7% after inflation is often considered good, based on the historical returns of the market.
Is 10% return on investment realistic? ›
Usually the implication is that they can expect, over a long time, a 10% return. Fortunately some ask, with some doubt, "Is a 10% return really reasonable?" It is not. While the average growth or return in the market (e.g., the S&P 500) is about 10%*, investors over time do not see that.
What are Motley Fool's double down stocks? ›
The Motley Fool advises holding onto winning stocks, as they often continue to outperform in the long run. "Double down buy alerts" from The Motley Fool signal strong confidence in a stock, urging investors to increase their holdings.
What is Motley Fool's all in Buy Alert stock? ›
We regularly see similar ads from the Motley Fool about “all in” buy alerts, sometimes also called “double down” or “five star” buys, and they're generally just the type of steady teaser pitch that they can send out all year, over and over with no updates, to recruit subscribers for their flagship Motley Fool Stock ...
How much will the S&P 500 be worth in 2025? ›
That suggests the S&P 500 could trade to 6,000 by August 2025, and to as high as 6,150 by November 2025. But in the short-term, amid the ongoing weakness in stocks, Suttmeier said investors should keep an eye on potential support levels for the S&P 500 at 5,000 as well as a range from 4,600 to 4,800.
Economists agree — 2024 may be a strong year for U.S. stocks. The S&P 500 rose 24% in 2023, according to MarketWatch, and recently crossed the 5,000 mark, according to Barron's. This year, we may see a “stock-pickers paradise,” according to Savita Subramanian, head of equity and quant strategy for Bank of America.
Should I pull my money out of the stock market? ›
It can be nerve-wracking to watch your portfolio consistently drop during bear market periods. After all, nobody likes losing money; that goes against the whole purpose of investing. However, pulling your money out of the stock market during down periods can often do more harm than good in the long term.
What are Motley Fool's top 10 stocks? ›
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies. The Motley Fool recommends the following options: short March 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.
What is Motley Fool's ultimate portfolio? ›
The Ultimate Portfolio is a carefully curated model portfolio created by Motley Fool's expert analysts. Its purpose is to offer a strategic roadmap that can lead to long-term investment success.
What is the average return from an investment advisor? ›
Estimates on the return on investment from having a financial advisor vary. In a 2019 whitepaper, Vanguard assessed an “Advisor's Alpha,” or the value that a financial advisor adds to a client's portfolio, to be about a 3% net return per year, depending on a client's circ*mstances and investments.
What is considered a good return on the stock market? ›
A good return on investment is generally considered to be around 7% per year, based on the average historic return of the S&P 500 index, adjusted for inflation. The average return of the U.S. stock market is around 10% per year, adjusted for inflation, dating back to the late 1920s.
What is ideal return from stock market? ›
That depends on your risk appetite, and the ability to hold on to stocks during the difficult market conditions. But historically, a return of 12-15% per annum compounded over the long term is considered very good, as this will grow exponentially as time goes by.
What is a realistic real rate of return? ›
A realistic rate of return for retirement depends on your asset allocation, investment management fees, inflation, and taxes. As a result, calculating your real rate of return means accounting for these factors when assessing your investment gains.
Is 15% a good return from the stock market? ›
Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. However, keep in mind that this is an average. Some years will deliver lower returns -- perhaps even negative returns. Other years will generate significantly higher returns.
