Stock market returns tend to vary dramatically from year to year. But when looking at stock market performance smoothed out over many years or decades at a time — or the average stock market return — a clearer trend starts to emerge.
What Is The Average Stock Market Return?
The S&P 500 has returned more than 10% per year on average. This is true for that benchmark index of U.S. stocks over both the past 10 years and over the past several decades.
The average stock market return, as measured by the S&P 500 index, is about 10.8% over the last 10 years, according to S&P Dow Jones Indices.
That is based on price return, which measures the capital gain or loss, or price change, of the index members. By comparison, total return measures not only returns from price change, but also returns earned from cash dividends and their reinvestment. Based on total return, the average stock market return is 12.8% over the past 10 years.
Since 1965, the S&P 500 has provided annualized total returns of 10.4% through 2024, according to data compiled by Berkshire Hathaway.
Over those 60 years, the S&P 500 rose in individual years by as much as 37.6% (in 1995) — and fell by as much as 37% as well (in 2008).
No individual stock goes up forever either, but the lesson here is that the stock market tends to move higher over time. Investing in well-chosen stocks can help you grow your money. Your investment may lose money over time, too, but common sense, discipline and the ability to ride out the market's ups and downs can reduce the risk of losses.
Your actual returns may be slightly less than the stock market return in any given year, after accounting for inflation and investment fees, and whether you reinvest dividends.
Best-Performing Stocks Of Past 10 Years
Here are the five top-performing stocks of the last five and 10 years in terms of their annualized total return, which is shown in parenthesis. This period included two major drawdowns and recoveries tied to the Covid-19 pandemic and a spike in inflation:
Across more than 3,500 U.S. stocks, as tracked by the Vanguard Total Stock Market ETF, the top performers over the past 10 years included Nvidia (up 71%), Applied Digital (64%), eXp World Holdings (55%), Celsius Holdings (54%) and Zynex (49%).
Over the past five years, the best-performing stocks included Applied Digital (up 141%), CPI Card Group (112%), Innodata (112%), GameStop (93%), and Antero Resources (93%).
Several of these outperformers are midcap or small-cap stocks, which can be little engines of stock market growth. However, U.S. large-cap stocks, collectively, have outpaced their midcap and small-cap peers in recent years.
The average stock market return for midcap stocks, as tracked by the S&P MidCap 400 index, is 8.9% over the past 10 years, on the basis of annualized total returns. It is 8.1% for small-cap stocks, as tracked by the S&P SmallCap 600 index.
That compares with the 12.8% annualized total return over 10 years for the S&P 500 index, which tracks the largest companies and covers roughly 80% of the U.S. market capitalization. Broadly speaking, stock market returns lagged in foreign markets over this same period.
Investors should bear in mind that outperformance isn't the smartest measure by which to choose stocks. Consider IBD's time-tested rules for investing in stocks instead.
But past performance can be illuminating, as in the case of Nvidia stock. Equally important, much all of GameStop's huge gains over the past five years owes to the meme-stock frenzy in January 2021.
Why Invest In Stocks?
Owning stocks in different companies offers the potential for rewards that can more than offset the risks of losing money. Investing in stocks can help you grow your savings; protect your money from inflation; and maximize income from your investments.
The stock market, it has been said, rewards patience and punishes greed. Taking the long view can help you enjoy compounding growth in stock market returns — and that has been stellar over time.
Just $100 invested in U.S. stocks in 1928 would be worth almost $800,000 at the end of 2023, according to data compiled by NYU Stern School of Business Professor Aswath Damodaran. That same $100 would be worth around $7,000-$10,000 if invested in bets perceived as safer, such as Treasurys and gold.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
