The average stock market return over the past 10 years

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• The S&P 500 has gained about 10.7% on average annually since it was introduced in 1957. 
• The index has done slightly better than that in the past decade, returning about 12.39% annually.
• Returns may fluctuate widely each year, but holding onto investments over time can help.

The S&P 500 average return over the past decade has come in at around 12.39%, beating the long-term historic average of 10.7% since the benchmark index was introduced 65 years ago.

But the stock market return you’ll see today could be very different from the average stock market return over the past 10 years. There are a few reasons why you could see a bigger or smaller return than the average during any given year.

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The S&P 500 average return over the past 10 years

There are many stock market indexes, including the S&P 500. This index includes 500 of the largest US companies, and some investors use its performance as a measure of how well the market is doing. The annual S&P 500 average return in 2022 was -18.1%.

“Investing can be a good way to grow wealth over the long term, and offers the potential for higher returns compared to a typical checking or savings account,” says Jordan Gilberti, CFP and senior lead planner at Facet.

Here’s how the yearly annual returns from the S&P 500 have looked over the past 10 years, according to Berkshire Hathaway data that includes earnings from dividends:

Berkshire Hathaway has tracked S&P 500 data back to 1965. According to the company’s data, the compounded annual gain in the S&P 500 between 1965 and 2022 is 9.9%.

While that sounds like a good overall return, not every year has been the same.

“Investing carries risks — you may be subject to losses, and may even lose all the money you put into an investment,” Gilberti notes. Just because this is the S&P 500’s current return, doesn’t mean you can count on it going forward.

While the S&P 500 fell more than 4% between the first and last day of 2018, its total return surged 31.5% in 2019. Plus, returns jumped from 18.4% in 2020 to 28.7% in 2021. But when many years of returns are put together, the ups and downs of the S&P 500 annual returns start to even out.

It’s worth noting that these numbers are calculated in a way that may not represent actual investing habits. The figures are based on data from the first of the year compared with the end of the year. But the typical investor doesn’t buy on the first of the year and sell on the last. While they’re indicative of the growth of the investment over the year, they’re not necessarily representative of an actual investor’s return, even in one year.

Investing in the S&P 500

When you’re buying stocks from the S&P 500, you’re not buying the entire index. Indexes shouldn’t be confused with index funds, which are investments meant to track the performance of certain sectors or assets in the stock market. You can invest in index funds that track the S&P 500 with some of the best stock trading apps and some of the best investment apps.

Some investors choose to buy shares of individual companies on the S&P 500. Some opt for mutual funds, which allow investors to buy a portion of several different stocks or bonds collectively. These individual mutual funds or stocks all have their average annual returns, and that particular fund’s return may not be the same as the S&P 500 annual returns. 

Plus, even if you invest in an S&P 500 index fund, a high expense ratio may reduce your overall returns to below average. Past performances don’t necessarily predict future returns.

Buy-and-hold evens out the market’s fluctuations

Investing experts, including Warren Buffett and investing author and economist Benjamin Graham, say the best way to build wealth is to keep investments for the long term, a strategy called buy-and-hold investing. 

There’s a simple reason why this works. While investments are likely to go up and down with time, keeping them for a long period helps even out these ups and downs. Like the S&P 500’s changes noted above, keeping investments for the long term could help investments and their returns get closer to that average.