The average stock market return is the single most important number for long-term financial planning. It tells you how fast your investments grow — and whether you’re on track for retirement.
The answer: the S&P 500 has averaged approximately 10% per year (nominal) since 1926. After inflation, the real return is approximately 7% per year.
The Data: S&P 500 Historical Returns
| Period | Average annual return (nominal) |
|---|---|
| 10-year (2016–2025) | ~12.4% |
| 20-year (2006–2025) | ~10.4% |
| 30-year (1996–2025) | ~10.7% |
| 50-year (1976–2025) | ~11.2% |
| Long-term (since 1926) | ~10.0% |
These are compound annual growth rates (CAGR) — the steady rate that produces the actual cumulative result, accounting for the compounding effect of returns.
Inflation-adjusted (real) returns are approximately 3 percentage points lower, as the US has averaged about 3% annual inflation historically.
Year-by-Year Volatility
The 10% average masks enormous year-to-year swings:
| Year | S&P 500 return |
|---|---|
| 2024 | +24.2% |
| 2023 | +26.3% |
| 2022 | -18.1% |
| 2021 | +28.7% |
| 2020 | +18.4% |
| 2019 | +31.5% |
| 2018 | -4.4% |
| 2017 | +21.8% |
| 2016 | +12.0% |
| 2015 | +1.4% |
| 2014 | +13.7% |
| 2013 | +32.4% |
| 2012 | +16.0% |
| 2011 | +2.1% |
| 2010 | +15.1% |
| 2009 | +26.5% |
| 2008 | -37.0% |
Key observation: Negative years happen but are temporary. Patient investors who stay invested through downturns capture the long-term average. The biggest mistake is selling during a downturn and locking in losses.
What $10,000 Grows To at Different Return Rates
| Initial investment | Rate | 10 years | 20 years | 30 years |
|---|---|---|---|---|
| $10,000 | 7% (real) | $19,672 | $38,697 | $76,123 |
| $10,000 | 10% (nominal) | $25,937 | $67,275 | $174,494 |
| $10,000 | 12% (above avg) | $31,058 | $96,463 | $299,599 |
| $10,000 | 5% (conservative) | $16,289 | $26,533 | $43,219 |
What $500/Month Grows To (Consistent Investing)
| Monthly contribution | Rate | 20 years | 30 years |
|---|---|---|---|
| $500/month | 7% | $260,464 | $605,985 |
| $500/month | 10% | $382,846 | $1,130,244 |
At 10%, consistent monthly investing of $500 for 30 years produces over $1 million. This is the power of compound growth — and why starting early matters far more than the exact return rate.
Average Returns by Asset Class
Not all investments return the same. Historical long-run returns by asset class:
| Asset | Historical annual return (nominal) |
|---|---|
| US large-cap stocks (S&P 500) | ~10% |
| US small-cap stocks | ~11%–12% |
| International developed stocks | ~7%–8% |
| Emerging markets | ~8%–9% (higher volatility) |
| US corporate bonds | ~5%–6% |
| US government bonds | ~4%–5% |
| US Treasury bills (cash equivalent) | ~3%–4% |
| Real estate (REITs) | ~10%–11% |
| Gold | ~5%–6% |
| Inflation (CPI) | ~3% |
Stocks significantly outperform bonds and cash over long periods — which is why financial planners recommend a high stock allocation for investors with 20+ year horizons.
Why Your Personal Return Will Differ from the Index
Several factors affect how your portfolio’s actual return compares to the index:
- Fund expenses — index funds cost 0.03%–0.10%; actively managed funds cost 0.5%–1.5%. The difference compounds significantly.
- Taxes — capital gains taxes in taxable accounts reduce net returns; use tax-advantaged accounts (401k, IRA, Roth IRA) to defer or eliminate this drag
- Behaviour — buying high and selling low during market panics is the most common return-killer. The average investor significantly underperforms the index by trading at the wrong times.
- Diversification — a concentrated portfolio may beat or trail the index significantly; diversification produces index-like returns
- Contribution timing — dollar-cost averaging (investing regularly regardless of market level) smooths out entry-point risk
The Rule of 72
Divide 72 by your annual return to find how long your money takes to double:
| Return rate | Years to double |
|---|---|
| 6% | 12 years |
| 7% | 10.3 years |
| 8% | 9 years |
| 10% | 7.2 years |
| 12% | 6 years |
At the historical 10% S&P 500 average, money doubles approximately every 7 years.
Internal Links
- Three-fund portfolio guide
- VOO ETF review — investing in the S&P 500
- Best Roth IRA investments 2026
- DRIP investing guide
- Portfolio basics guide
Bottom Line
The stock market’s long-run average return is approximately 10% per year (nominal) or 7% per year (real, inflation-adjusted). This is based on nearly 100 years of S&P 500 data. Individual years vary dramatically — from -37% to +38% — but patient investors who stay invested and contribute regularly capture the long-run average. The key drivers of your actual return: low fees, tax-advantaged accounts, diversification, and discipline to stay invested through downturns.
Past performance does not guarantee future results. This article is for educational purposes only and does not constitute personalised investment advice.
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