What Is the Average Stock Market Return?
The S&P 500 has returned about 10% a year long-term — roughly 7% after inflation. What that number really means, why it’s never smooth, and how to use it for planning.
The short version
- The S&P 500 has averaged about 10% a year since 1926, with dividends reinvested.
- After inflation, the real return is closer to 7% — that’s the number that matters for buying power.
- The average is never smooth: single years routinely swing from −30% to +30%.
- Long time horizons and reinvested dividends are what turn that average into real wealth.
Ask what return to expect from investing and you’ll hear one number over and over: 10% a year. It’s a real, well-documented figure — but quoting it without context leads people to expect a smooth ride that has never actually existed. Here’s what the average return really is, and how to use it honestly.
The headline number: about 10%
Measured over the long run — since 1926 — the S&P 500 has delivered an average annual return of roughly 10%, assuming dividends are reinvested. That span includes the Great Depression, World War II, stagflation, the dot-com crash, 2008, and the COVID shock. Through all of it, a broad basket of large U.S. companies compounded at about 10% a year on average. That’s the number behind most retirement projections.
The number that actually matters: about 7%
The 10% figure is nominal — before inflation. What grows your real buying power is the return after inflation, and historically that’s been closer to 7% a year. That gap is the whole reason to invest in the first place: money left in cash slowly loses value to inflation, while a ~7% real return roughly doubles your purchasing power every decade.
Always ask: nominal or real?
A 10% nominal return with 3% inflation is a 7% real return. When you set expectations for retirement or a long-term goal, plan around the real (after-inflation) number — it’s what your money will actually buy.
The average is never a straight line
Here’s the part the “10% a year” shorthand hides: almost no individual year is average. The market routinely gains 20–30% in a good year and loses just as much in a bad one. Down years of −20% or worse show up regularly. The 10% is what you get by staying invested through all of it — not something the market hands you evenly each year. Selling during the bad stretches is how people miss the average entirely.
How to use it for planning
- Use the real (~7%) return for long-term goals so inflation is already accounted for.
- Give it time — the average only shows up reliably over long horizons, not a few years.
- Reinvest dividends; a large share of that long-term return comes from compounding them.
- Expect volatility and don’t sell into it — the average assumes you stayed in your seat.
See what it becomes over time
Plug a return into a compound-interest projection — with regular contributions — to see how an average like this turns into real money over 20 or 30 years.
Curious how fast a given return doubles your money? The Rule of 72 gives you the shortcut.
Sources
This article is for general education and is not financial, tax, or legal advice. Figures reflect published 2026 IRS and SSA amounts as of the date above; verify current limits with the linked sources or a qualified professional before acting.
About the author
David Miles is the founder of FigureMoney and builds independent, source-backed personal-finance tools across the Modern Site Builders network. Every calculator and guide cites the IRS, SSA, or primary research behind its numbers.
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