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The Average Long-Term Stock Market Returns

The Average Long-Term Stock Market Returns

Let's dive into a valuable life lesson from this image. The U.S. stock market is often touted for its average 10% yearly return. But what does 'long-term' really mean in this context?

Shows the returns of the S&P 500 for the last 5 years, 10 years, 20 years, and 30 years as averages. It shows how different time horizons offer different average returns.

What is the average stock market return?

Check out the chart, and you'll notice that the stock market doesn't offer the same returns over different time periods. While 10% has been the long-term average over the past 96 years (since 1926), it's been closest to that mark in the last decade. Other time frames, both shorter and longer, tell a different story.

What is the long term average stock market return? Long-Term Investing Averages

Over the past 30 years, the average return was around 7.5% annually. This means that $10,000 invested back then would have grown to about $88,000 by the end of 2022. If the S&P had delivered a consistent 10% yearly return, that $10,000 would be a whopping $174,000. Quite the difference, right?

What is the long term average share market return?

So, what's this mean? When you're investing, it pays off to think in the long term. If you're 50 today, you might think you're only 15 years away from 'retirement,' but in reality, your investment journey could span another 40+ years.

The Average Long-Term Stock Market Returns

The longer you stay invested, the more you can count on those long-term averages. Two years? Anything can happen. 50 years? You can bet on a more predictable range of returns.

The S&P 500 calendar year returns. It's easy to see how each year's returns are entirely different and unpredictable or unreliable. They almost never have the average return in any one year.
Weather is a short-term, unpredictable and volatile condition. The climate is more stable and predictable over the longer-term. The two have similarities, but are ultimately different based on time horizons.

What is the average S&P 500 return?

This concept extends beyond investing: Short-term thinking is like trying to predict tomorrow's weather – unpredictable and subject to sudden changes. In contrast, long-term thinking is akin to studying climate patterns over years, where trends and patterns become clearer and more reliable.

Here's another analogy: Short-term thinking is like inspecting individual trees in a forest, focusing on immediate concerns. But you might miss the bigger picture – the forest's overall health and growth. Long-term thinking is about embracing that bigger picture and the stability it offers.

The key takeaway? While the short-term matters, especially since we live our lives in the present, the long-term is where you want to keep your eye on. Don't base your plans on short-term results. If someone mentions an investment's performance over the past year, five years, or even a decade, it's not truly relevant if your horizon is 50+ years.

Data provides insight, but understanding what's relevant is equally important. Numbers tell part of the story, but being open to learning and evolving your thinking is the other crucial piece. One side is quantitative; the other is psychological.

If you like this article, here's a video that explains a related concept, that you might enjoy

By: Cam Irvine

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