Historical Returns for the S&P 500, 1980 to 2021
You might better comprehend your investment strategy by looking at historical stock market returns. The stock market has historically returned, on average, 10% annually, or 7% when inflation is considered. Looking back, you may observe how market volatility affected particular years and how the market recovered following certain years. Historical stock market returns broken down by year can help long-term investors manage their portfolios more effectively. A table of historical annual stock market returns for the S&P 500 index from 1980 through 2021 can be found at the end of this article.Key Takeaways
- Despite the negative price declines, the stock market has historically produced positive returns on average.
- "Market corrections" are defined as price declines of less than 10% from the preceding high.
- A bear market occurs when index prices drop by 20% or more.
- By remaining in the market, making great stock investments, and gradually adding more funds, wealth can be built over the long term.
How Often Does the Stock Market Lose Money?
Although there have been some years with negative stock market returns, historically speaking, the good years have outnumbered the bad ones. The long-term average return, which averages out to multiple years' worth of performance, may fluctuate significantly from the actual return you receive in any particular year. As of March 3, 2022, the S&P 500 Index, for instance, had a 10-year annualized return of around 12.1%. A stock market index may have increased over the course of ten years, yet it may have decreased in one of those years. You can frequently hear references to market corrections and bear markets in the media when a market is volatile or going through a period of poor results. A market correction occurred when the stock market's decline from its prior high price level was less than 10%. A market correction might never be reflected as a loss in calendar-year total returns because it can occur during the year, and the market can recover by the year's end. It is said to be in a bear market when the market loses more than 20% of its value from its peak for at least two months. A bear market may last a few months or more than a year, but on average, it lasts 289 days. That doesn't mean the market won't conclude the year on a high note, even if it goes through a downturn or a bear market like it did in 2020. The stock market in 2020 entered a bear market in March, but it ended the year by more than 18%. Over various decades, the return pattern changes. Financial planners refer to this type of risk as sequence risk, which can affect your retirement finances if many unfavorable years occur early on. It's reasonable to assume a certain number of terrible years, but it doesn't mean you shouldn't invest in stocks; it just means you should do so with a realistic outlook.Time in the Market vs. Timing the Market
The market's down years have an effect, but how much of an effect often depends on whether you opt to stay involved or sell. Long-term investors often see significant returns, whereas short-term investors who enter the market and exit after a difficult year may suffer losses. For instance, the S&P 500 lost nearly 37% of its value in 2008. 8 If you had put $1,000 into an index fund at the beginning of the year, you would have had almost $370 less at the end of the year, or a loss of about 37%. However, you would have lost money if you had sold the investment at that point. But because of how bad that year was, it can take a long time for your investment to recover its worth. Your beginning value for the year after 2008 would have been $630. The market grew by 26% in the following year, 2009. Your value would have increased to $794, which is still less than your initial $1,000 value. You would have gained another 15% if you had held onto your investment through 2010. Although still shy of a full recovery, your money would have increased to roughly $913. Another good year came in 2011, although it only resulted in a 2 percent increase. You wouldn't have surpassed your $1,000 initial investment until 2012's growth of an additional 16 percent. You'd have roughly $1,080.96 by that time. The 2008 recession might not have been as bad for you if you continued investing in the market. However, if you had sold and put your money in more secure investments, it would not have had time to regain its value. Nobody can predict when there will be a downturn in the stock market. No one can consistently pace the market to get in and out and escape the down years, so if you don't have the stamina to stay invested through a bear market, you may decide to stay out of stocks or be ready to lose money. If you invest in stocks, become accustomed to the bad years. You'll find sticking to your long-term investing plan simpler if you realize those down years will occur. The good news is that over time, American financial markets may generate enormous riches for its participants, notwithstanding the danger involved in dipping your financial toes into the ponds of stock investing. You will be well on your way to achieving your financial objectives if you invest for the long term, keep growing your investment, and manage risk wisely. On the other side, you'll probably find the stock market very cruel if you try to use it to make quick money or indulge in reckless behaviors. Everyone would do it if a tiny amount of money could make them extremely wealthy in a short period of time. Avoid believing that short-term trading is the best method for accumulating wealth.Calendar Returns vs. Rolling Returns
Most investors don't start investing on January 1 and stop on December 31; nonetheless, market returns are typically reported on a calendar-year basis. The market returns across 12-month periods, such as from February to the following January, March to the following February, or April to the following March, can also be seen as rolling returns. For a perspective that goes beyond a calendar year view, look at graphs of historical rolling returns. The calendar-year stock market returns from 1980 to 2021 are displayed in the table below.Historical S&P 500 Index Stock Market Returns
| Year | Return |
| 1980 | 31.74% |
| 1981 | -4.70% |
| 1982 | 20.42% |
| 1983 | 22.34% |
| 1984 | 6.15% |
| 1985 | 31.24% |
| 1986 | 18.49% |
| 1987 | 5.81% |
| 1988 | 16.54% |
| 1989 | 31.48% |
| 1990 | -3.06% |
| 1991 | 30.23% |
| 1992 | 7.49% |
| 1993 | 9.97% |
| 1994 | 1.33% |
| 1995 | 37.20% |
| 1996 | 22.68% |
| 1997 | 33.10% |
| 1998 | 28.34% |
| 1999 | 20.89% |
| 2000 | -9.03% |
| 2001 | -11.85% |
| 2002 | -21.97% |
| 2003 | 28.36% |
| 2004 | 10.74% |
| 2005 | 4.83% |
| 2006 | 15.61% |
| 2007 | 5.48% |
| 2008 | -36.55% |
| 2009 | 25.94% |
| 2010 | 14.82% |
| 2011 | 2.10% |
| 2012 | 15.89% |
| 2013 | 32.15% |
| 2014 | 13.52% |
| 2015 | 1.38% |
| 2016 | 11.77% |
| 2017 | 21.61% |
| 2018 | -4.23% |
| 2019 | 31.21% |
| 2020 | 18.02% |
| 2021 | 28.47% |
Frequently Asked Questions (FAQs)
What are the long-term stock market's typical returns?
The stock market has historically returned about 10% annually on average. Depending on various market circumstances, this can change significantly from year to year.How can I increase my stock market returns?
You need to invest in a riskier portfolio to outperform the stock market's average performance. Examples of equities with greater growth potential include international stocks, small- and mid-cap companies, and growth stocks, which also carry greater risks. To assist you in choosing the ideal combination for an aggressive growth strategy, talk to a financial counselor about your investment objectives.How can I forecast stock market returns in the future?
The longer the forecasted period, the more likely the market will exhibit similar trends. Past market performance can be used as a guide. Nobody, however, can accurately forecast when the market will experience significant upturns or deep downturns. Planning for the possibility of loss and hedging your risks appropriately is crucial.