Average Stock Market Return

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 more than 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.

10-year, 30-year, and 50-year average stock market returns 

Let's take a look at the stock market's average annualized returns (adjusting for inflation) over the following 10, 30, and 50-year time frames, using the S&P 500 as our proxy for the market.

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, let's say you invested $100 in the S&P 500 at the beginning of 1973.

You would have about $18,940.81 at the end of 2024 if you reinvested all dividends -- a return on investment of 18,840.81%, or 10.74% per year.

Now, if you're looking at an inflation-adjusted return, that's approximately 2,567.20% cumulatively, or 6.59% per year.

Buy-and-hold investing

If there's any one lesson we can take from the breakdown of annual results vs. 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 has gained value in approximately 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. For far more years, it 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 who 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.