What is the Average S&P 500 Return? (Historical Truth)
Everyone says the stock market returns “10% per year.” But that doesn’t mean you get a steady paycheck. Some years you make 30%, other years you lose 20%. Here is the ugly truth behind the beautiful average.
Average
~10%
Nominal ReturnHist
Real
~7%
After InflationFact
Horizon
10+ Yrs
To Be SafeTime
It’s a Roller Coaster, Not an Escalator
New investors expect a smooth ride up. Experienced investors know they have to stomach the vomit-inducing drops to reach the top.
| Metric | Value | Meaning |
|---|---|---|
| Nominal Return | 10.2% | Number on screen |
| Inflation | -3.1% | Purchasing power loss |
| Real Return | ~7.1% | Actual wealth growth |
The “Lost Decade” Warning
Sometimes the market does nothing for a long time. From 2000 to 2010, the S&P 500 return was basically 0% (flat). This is why you cannot invest money you need next year.
The Power of Compounding
| Strategy | Result |
|---|---|
| Timing Market | Usually Fail |
| Time IN Market | Success |
Extreme Volatility (Be Prepared)
You have to be willing to see your account balance drop by 30% without selling. If you panic sell, you lock in the loss.
| Year | Event | Return |
|---|---|---|
| 2008 | Global Financial Crisis | -38.49% |
| 1995 | Dot-Com Boom | +34.11% |
| 2013 | Post-Crisis Recovery | +29.60% |
| 2022 | Inflation Spike | -19.44% |
*Data Source: NYU Stern Historical Returns
Pro Tip: The Rule of 72
Want to know when your money will double? Divide 72 by your expected return.
The Math
If you get a 7% Real Return:
Your purchasing power doubles roughly every decade. This is the magic of patience.
72 ÷ 7 = 10.2 Years
Your purchasing power doubles roughly every decade. This is the magic of patience.
Frequently Asked Questions
Is 10% guaranteed?
Absolutely not. It is a long-term historical average. Next year could be -20%. Never put your rent money in the stock market.
How do I buy the S&P 500?
You can’t buy the “Index” directly. You buy an ETF (Exchange Traded Fund) that tracks it, like VOO, IVV, or SPY. They all do the same thing.