What Is the Average Stock Market Return?
Quick Answer
Historically, the average stock market return is around 10% annually, but that doesn’t mean you’ll always see a 10% return. Overall stock market returns can fluctuate daily, and your individual returns will also vary based on your investments.
Historically, the average stock market return is about 10% per year, but this figure can vary widely from one year to another depending on market conditions. In addition, your individual investment returns may differ from the overall average depending on your specific investments.
What Is the Average Stock Market Return?
Over the past 100 years, the average stock market return has been around 10% annually, based on the S&P 500 market index. The S&P 500 is one of the three most influential stock market indexes. It tracks the performance of about 500 of the largest U.S. companies, and is generally seen as reflecting the stock market as a whole.
Learn more: What Are Stocks?
Average S&P 500 Returns by Time Period
The table below shows average S&P 500 returns over various time periods.
| Period | Average Annual S&P 500 Return |
|---|---|
| 5-year (2020-2024) | 14.25% |
| 10-year (2015-2024) | 12.21% |
| 20-year (2005-2024) | 9.72% |
| 30-year (1995-2024) | 10.49% |
Source: Macrotrends
Why the Average Stock Market Return Isn't Always Average
Although the stock market's average rate of return is 10%, that doesn't mean the value of your investments will increase 10% each year. Stock market returns change constantly based on a variety of factors, including the political climate and the state of the national and global economy. For example, during the Great Recession of 2008, the S&P 500's average return plummeted to -38.49%. In 2023, as inflation eased and recessionary concerns declined, the S&P 500's average return soared to 24.23%.
The price of a company's stock may rise if the company's financial performance improves, or drop if its finances take a turn for the worse. Positive or negative publicity about a company can also impact its stock prices. Finally, news and trends in a certain sector or industry can affect the stock prices of companies in that category.
Diversifying your investments can protect your portfolio against these inevitable market ups and downs. Stocks may deliver high returns, but you also risk losing your investment. Investments such as bonds offer modest returns but less risk. Investing in a mix of both high- and low-risk assets makes your portfolio less vulnerable to market swings.
Learn more: Diversification in Investing: What It Is and How to Do It
How to Invest in the Stock Market
If you're interested in investing in the stock market, here's how to begin.
- Open a tax-advantaged retirement account. If your employer offers a 401(k) or 403(b) retirement plan, start there. If your job doesn't offer a retirement plan, you can open an individual retirement account (IRA).
- Decide how much to invest. It's generally recommended to contribute 10% to 15% of your gross income to your retirement account, and 20% as you get closer to retirement. If that's not in your budget, put in at least enough to get the full amount of any employer match if your employer offers one.
- Open a brokerage account. If you're fully funding your retirement plan and want to do more, you can open a brokerage account to buy and sell investments. Options include online brokerages that let you manage your own trades, robo-advisors that automate your investments based on your goals, and financial advisors who select and manage your investments for you.
- Select your investments. Whether you're investing via a retirement account or brokerage account, choosing the right asset allocation can help protect your money from market fluctuations. Mutual funds, exchange-traded funds (ETFs) and target-date funds offer built-in diversification, which can reduce your risk compared to selecting individual stocks.
- Regularly rebalance your portfolio. Market changes can throw your asset allocation mix off course; review your investments quarterly or annually and adjust them as needed. Robo-advisor plans generally rebalance your portfolio automatically.
Learn more: How to Start Investing
The Bottom Line
Investing in the stock market through your retirement plan can help you build wealth for the future. If you're funding a retirement plan, your emergency fund can cover three to six months of expenses and your debt is manageable, you may want to ramp up your investing through a brokerage account.
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About the author
Karen Axelton
Karen Axelton specializes in writing about business and entrepreneurship. She has created content for companies including American Express, Bank of America, MetLife, Amazon, Cox Media, Intel, Intuit, Microsoft and Xerox.
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