What is the average stock market return? We ran 98 years of data — the answer is 10%, 6.8%, or neither.
The short answer
We computed this directly from Aswath Damodaran's NYU Stern dataset of annual S&P 500 total returns for 1928–2025 (98 years, updated January 2026). The arithmetic average is 11.86%, the compounded return you'd actually have earned is 10.02%, and after inflation — using CPI data from the Federal Reserve Bank of Minneapolis — it's 6.79%. Use 10% for nominal headlines and 6.79% for any plan that involves spending the money. But the single most useful statistic isn't an average at all: only 4 of those 98 years finished between +8% and +12%. The average year essentially never happens.
Three distinct mistakes get made with this number. Here they are in order of how much damage they do.
Mistake 1: quoting the arithmetic average
Add up 98 annual returns, divide by 98, and you get 11.86%. That figure is correct and nearly useless, because returns compound rather than add.
The number that describes what you'd actually have is the geometric mean, or CAGR: 10.02%. The 1.84-point gap between them is a mathematical consequence of volatility, not a rounding difference. A portfolio that gains 50% then loses 50% has an arithmetic average return of 0% and has lost a quarter of its money.
Concretely, from our computation: $100 invested at the start of 1928 and left alone became $1,157,591 by the end of 2025. If the arithmetic average were the real rate, it would have been far more. Anyone quoting ~12% as "the market's return" is overstating what compounds by about two points a year — which over 30 years is not a small error.
Mistake 2: ignoring inflation
The 98-year period saw prices rise 18.5-fold, an inflation rate of 3.02% compounded. Subtract it and the market's real return is 6.79%.
That same $100, measured in purchasing power rather than dollars, grew to $62,572 — not $1.16 million. Both numbers are correct; they answer different questions, and only one of them is about what you can buy.
This matters because retirement planning is denominated in groceries, not dollars. A plan built on 10% when the real figure is 6.79% doesn't fail by a third — it fails by much more, because the error compounds for decades.
In real terms the market is also meaningfully riskier than the nominal series suggests: 31.6% of years lost purchasing power, against 26.5% that lost nominal value.
Mistake 3: treating the average as a forecast for any given year
This is the one almost nobody states, and it's the most practically important. Here's the distribution we computed:
| Statistic | 1928–2025 |
|---|---|
| Arithmetic average | 11.86% |
| Compound (CAGR) | 10.02% |
| Real CAGR (after inflation) | 6.79% |
| Standard deviation | 19.40% |
| Negative years | 26 of 98 (26.5%) |
| Years between +8% and +12% | 4 of 98 (4.1%) |
| Years above +20% | 36 of 98 (37%) |
| Years below −10% | 12 of 98 (12%) |
| Best year | +52.56% (1954) |
| Worst year | −43.84% (1931) |
Read that table again. A year near the average is rarer than a crash. You are nine times more likely to see a gain above 20% than a return within two points of the long-run average, and three times more likely to see a double-digit loss.
The market's "average" is a description of a long sequence, not a prediction about any member of it. The standard deviation — 19.40% — is nearly double the mean. That's the actual texture of the thing.
John Bogle made this point about long-run gravity in his 1998 MIT lecture on reversion to the mean, noting that returns
mysteriously seem to be drawn to norms of one kind or another over time.
The operative words are over time. Drawn to a norm eventually is entirely compatible with almost never being at it.
The honest counterargument: this is one country's lucky century
The biggest weakness in every "average stock market return" article, including this one, is that the data comes from the United States over the period in which it became the dominant global economy. That is close to a best case, selected after the fact because it's the market with the cleanest long series and the one whose history we happen to be standing in.
Other developed markets over the same century delivered materially lower real returns, and several had stretches where domestic equity investors lost most of their purchasing power for reasons — war, hyperinflation, expropriation — that never appear in the S&P 500 series. Using US history as the base rate for the future embeds a survivorship assumption that nobody can verify in advance.
Two reasonable responses: hold global equities rather than only US ones, and plan with a real return somewhat below 6.79% rather than above it. The point isn't that 6.79% is wrong — it's that it's the outcome of the single most favorable large sample available, and treating the luckiest observed path as the expected one is how plans break.
A second, smaller caveat on our own method: index-level returns ignore fees and taxes. Both are real and both subtract. On a 6.79% real return, a 1% fee takes about 14.7% of it — the arithmetic is in how much investment fees actually cost you.
What to do with the number
- Plan with 6.79% or less, in real terms. If a projection uses 10%, check whether it has quietly also assumed zero inflation.
- Never plan a specific year. The average year is a statistical artifact. Expect something between −20% and +30% and you'll be right most of the time.
- Don't treat a big year as evidence of anything. 37% of years beat +20%. That's the base rate, not a signal, and not skill.
- Let the horizon do the work. The average becomes reliable only across decades — which is the subject of how long you have to hold stocks.
Why the distribution matters more than the mean
Knowing the average is 10% doesn't prepare you for anything. What determines your outcome is what you do during the 26.5% of years that are negative and the 12% that are badly negative — and that's a behavior, not a statistic.
This is the gap Sydnical is built around. You run real positions at live prices with no money at risk, and the feedback is on decision quality — patience, sizing, concentration, discipline — rather than a balance that's mostly noise over short windows. The historical crash scenarios put you inside the tail years specifically, day by day, without telling you where the bottom is. Most people discover they sell. Better to discover it in an afternoon than across a decade of compounding, and our comparison pages are honest about when a broker's own simulator suits you better.
FAQ
What is the average annual stock market return?
Computed from annual S&P 500 total returns for 1928–2025, the arithmetic average is 11.86% and the compound annual return — what an investor would actually have earned — is 10.02%. After inflation, the real compound return is 6.79%. The commonly quoted "about 10%" refers to the nominal compound figure.
What is the stock market's average return adjusted for inflation?
6.79% a year over 1928–2025, using Minneapolis Fed CPI data. Inflation compounded at 3.02% across that period, a cumulative 18.5-fold rise in prices. Real returns are the right basis for any plan involving future spending.
Why is the compound return lower than the average return?
Because returns multiply rather than add, and volatility drags the compounded result below the simple average. The S&P 500's arithmetic average is 11.86% while its compound return is 10.02% — a 1.84-point gap created entirely by year-to-year variation. A 50% gain followed by a 50% loss averages 0% but leaves you down 25%.
How often does the stock market return its average?
Almost never. Only 4 of the 98 years from 1928 to 2025 finished between +8% and +12%. By comparison, 36 years gained more than 20% and 12 lost more than 10%. The average describes a long sequence rather than a typical year.
Can I expect 10% returns on my investments?
Not reliably, and not in purchasing power. The 10% figure is nominal, pre-fee, pre-tax, and drawn from the most favorable long-run sample available — US equities during the American century. A real return of 6.79% minus your costs is a more defensible planning assumption, and planning slightly below it is more defensible still.
Sources
- Aswath Damodaran — Historical Returns on Stocks, Bonds and Bills, NYU Stern, updated January 2026 (annual S&P 500 total returns, 1928–2025)
- Federal Reserve Bank of Minneapolis — Consumer Price Index, 1913–
- John C. Bogle, "Reversion to the Mean: Sir Isaac Newton's Revenge on Wall Street", Distinguished Lecture Series, MIT Lincoln Laboratory, 29 January 1998
Every average, standard deviation and distribution count in this post is our own computation over the 98 annual observations in the Damodaran series, deflated by the Minneapolis Fed CPI where stated.
The average is a summary of a century. Your outcome is decided in the 26% of years that are negative. Find out what you do in those →