In 2021, the S&P 500 was up 28.7%.
In 2022, it was down 18.1%
In 2023 and 2024, the market went up 26.3% and 25%, respectively.
This year the S&P 500 is down 6% or so.
That’s a lot of ups and downs in a short period of time. The annualized return in this four years and change was *drumroll* a little more than 10% per year.
All of that movement and we landed right at the very long-run average.
This got me thinking — how often does the stock market give you 10% annual returns over various time frames?
Here’s what I did — looked at S&P 500 return data going back to 1926, calculated the 3, 5, 10 and 20 year returns from the start of each year and then figured out how many of those annual return streams were 10% or better.
These are the results:
I suppose it makes sense that average returns occur around half the time. That’s how averages work although outliers can potentially skew the data.1
For instance, 15% of all 3 year returns were negative. Over 5 and 10 years, returns were negative 13% and 4% of the time, respectively. There were no 20 year periods with negative returns.
Alternatively, 35% of all 3 year periods experienced returns of 15% per year or higher. Over 5, 10 and 20 years it was 32%, 24% and 10% of the time, respectively.
So there’s a decently wide range around the averages, even over longer time frames.
It is worth noting that there were a number of returns that were relatively close to the long-term averages. So I looked at the percentage of time the stock market returned more than 7%, 8% and 9% as well:
Those win rates are obviously higher but you can see high returns are promised to no one.
The odds have been in your favor historically but 24% of the time the U.S. stock market returned less than 7% per year over 10 years.
This is one of the nerve-wracking and frustrating aspects of investing in risk assets. Most of the time things are going to work out for you as a long-term investor. But some of the time you probably aren’t going to be thrilled with the results.
So goes the nature of risk in the markets.
This is one of the reasons I’m such a big proponent of dollar cost averaging. It’s a way to diversify your entry points to increase your odds of success.
Further Reading:
31 Years of Stock Market Returns
1This is a little nerdy but it’s also worth pointing out that these are geometric averages that take into account compounding and not a simple arithmetic average.
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