The past decade has been dandy for stocks. From 2012 through 2021, the average stock marketplace return was 14.8% annually for the S&P 500 alphabetize (SNPINDEX:^GSPC). The returns can -- and do -- vary wildly from ane twelvemonth to the next, and an "average" year about never actually generates the average render.

Over that decade, only one year, 2014, was shut to the xiv.8% average annualized return. The grab? Nobody knows which years will be in a higher place or beneath average. This is where the i-twelvemonth average is helpful just in setting the stage for stocks as proficient long-terminvestments.

Infographic of stock market facts including variation, buy and hold strategy and the average return.

Paradigm source: The Motley Fool.

Average stock market place returns

In general, when people say "the stock market," they mean the S&P 500 index. The S&P 500 is a collection -- referred to equally a stock market index -- of just over 500 of the largest publicly traded U.Southward. companies. (The list is updated every quarter with major changes annually.) While there are thousands more stocks trading on U.S. stock exchanges, the Southward&P 500 comprises about 80% of the entire stock market value on its own, making it a useful proxy for the performance of the stock marketplace every bit a whole.

The market's results from 1 year to the next can vary significantly from the average. Let's use the 2012-2021 period as an example:

  • Down iv.4%: one twelvemonth
  • Upwards 2% or less: one twelvemonth
  • Up more than 20%: 4 years
  • Up between 12% and xix%: four years

To put it another way, six of those 10 years resulted in outcomes that were very unlike from the xiv.viii% annualized boilerplate return over that decade. Of those six very different years, 2 generated significantly lower returns (with 1 year, 2018, resulting in losses), while four years delivered essentially collegereturns. Two of those years -- 2013 and 2019 -- generated returns of more than thirty%, helping to make up for the years that saw below-average returns.

10-twelvemonth, 30-year, and fifty-yr average stock market returns

Allow's take a look at the stock market'due south boilerplate annualized returns over the past 10, thirty, and 50 years, using the S&P 500 as our proxy for the market.

 Flow

Annualized Render (Nominal)

Annualized Real Render (Adjusted for Inflation)

$1 Becomes... (Nominal)

$one Becomes... (Adjusted for Inflation)

10 years (2012-2021)

14.8%

12.4%

$3.79

$3.06

30 years (1992-2021)

9.9%

7.3%

$11.43

$five.65

50 years (1972-2021)

9.4%

five.4%

$46.69

$6.88

Data source: MoneyChimp.

It'south worth highlighting the variance in annual returns from one year to the side by side versus the average. Since 1972, here is a breakup of the yearly results:

  • Returns of 20% or more: 19 years
  • Returns between 10% and 20%: thirteen years
  • Returns between 0% and 10%: nine years
  • Losses between 0% and ten%: iv years
  • Losses between 10% and 20%: 2 years
  • Losses of more than xx%: three years

Stock marketplace returns vs. inflation

In addition to showing the average returns, the tabular array higher up likewise shows useful information on stock returns adjusted for inflation. For instance, $one invested in 1972 would be worth $46.69 today.

But, in spending power, $46 isn't worth what it would have been in 1972. Adjusting for aggrandizement, that $46 will purchase the same corporeality of goods or services you would have been able to buy with $6.88 in 1972.

Buy-and-hold investing

If there'due south any one lesson nosotros can take from the breakdown of annual results versus the average, it'south that investors are far more likely to earn the best returns past investing for the long term. There'south simply no reliably accurate way to predict which years will be the good years and which years will underperform or fifty-fifty pb to losses.

But we practice know that, historically, the stock market has gone upwards more years than it has gone downwardly. The S&P 500 gained value in twoscore of the past 50 years, generating an average annualized return of 9.4%. Despite that, only a scattering of years actually came within a few percentage points of the actual boilerplate. Far more years significantly either underperformed or outperformed the average than were close to the average.

What'due south a person to exercise? Buy high-quality stocks, ideally regularly across every market status, and hold those investments for many years. The prove is overwhelming that investors who try to trade their way to higher returns with short-term moves or purchase and sell based on projections of short-term peaks and bottoms generally earn below-average returns. Moreover, those strategies require substantially more time and effort. They can too result in higher fees and taxes that farther reduce gains.

If you're looking to build wealth, investing in stocks is an excellent place to beginning. But to become the best returns in stock investing, employ the method that's tried and true: Buy keen stocks and concur them for equally long equally possible.