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Average rate of return for the stock market in last 50 years

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History of investment in rate of return for stocks:

Historical records related to rate of return on investment in stocks not only provide insight into how things worked out in the past. But, it is also a handy tool to predict the future of the market. It can help you analyze how much can you earn in the future, what kind of risks you may face, the volatility of the market, and so on.

Stats about Rate of Return

Talk about the stats, here are some statistical figures as far as rate of return on the stocks is concerned:

  • Historically, the most agreeable value for return on stocks over the last century is 10%. But, keep in mind that this figure is not adjusted for inflation rate or consumer price index (CPI)
  • However, S&P 500  shows an annual return of 10% to 11% from 1926 to 2018. But, these stats also include the returns before adding the top 500 stocks in S&P. S&P came into existence in 1926 as a “composite index”. Hence, it consisted of only 90 stocks at that time.
  • So, after the inclusion of 500 stocks in 1957, the average yearly return is 8% (from 1957 to 2018)
  • Just after, adjusting the annual return for inflation, the figure of 10% drops to 7% (S&P 500).
  • The average yearly return on stocks in the S&P 500 is 11.69% (from 1973-2016).
  • The S&P 500 is excluded from the calculations. However, the average return of the stock market is just 7% (this value is not adjusted for inflation).
  • Moreover, average yearly return on stocks in the last 50 years is 10.09 percent
  • Furthermore, the average annual rate of return in the last 10 years is approximately 6.88%.
  • As far as, mutual funds are concerned, over the last 30 years, the S&P 500 yielded  6.73% an average yearly return while for other stocks, this value was 3.66%.

Adjustment for inflation of rate of return:

Hence, after the adjustment for inflation, the return on stocks can be presented as follow:

Time period Yearly return rate (before adjustment for inflation) Yearly return rate (after adjustment for inflation)
1871 to 2015 9.05 percent 6.86 percent
1916 to 1965 10.36 percent 7.90 percent
1966 to 2015 9.69 percent 5.38 percent

Mean figures: 

Now, one thing you need to understand is these figures are average or mean figures. Rate of return can vary from year to year. It can be greater than 11 percent or sometimes, it was in negative figures too. Here is the detail representation of rates of return for the last 50 years:

Year Rate % Year Rate % Year Rate % Year Rate % Year Rate %
1969 -8. 63 1979 18. 69 1989 32.00 1999 21. 11 2009 27. 11
1970 3. 60 1980 32. 76 1990 -3.42 2000 -9. 11 2010 14. 87
1971 14. 54 1981 -5. 33 1991 30.95 2001 -11. 98 2011 2. 07
1972 19. 15 1982 21. 22 1992 7. 60 2002 -22. 27 2012 15. 88
1973 -15. 03 1983 23. 13 1993 10. 17 2003 28. 72 2013 32. 43
1974 -26. 95 1984 5. 96 1994 1. 19 2004 10. 82 2014 13. 81
1975 38. 46 1985 32. 24 1995 38. 02 2005 4. 79 2015 1. 31
1976 24. 20 1986 19. 06 1996 23. 06 2006 15. 74 2016 11. 93
1977 -7. 78 1987 5. 69 1997 33. 67 2007 5. 46 2017 21. 94
1978 6. 41 1988 16. 64 1998 28. 73 2008 -37. 22 2018 -4. 41


2019 31. 10%


Reasons affect the market rate of return:

It is evident that market return varies from year to year. One year, it was booming and the very next year it dropped to a negative value (losses). Now, the average yearly return is 10% and you can see that individual values around this figure are very few. This can easily portray the extent of volatility and inconsistency that is associated with the stock market. There are different reasons that may affect the market that may include a political event, changes in government policies, international or global events, natural disasters, and so on. It is to be noted that inflation plays an important role while calculating the return rate.

Effect of inflation:

Although, the average return yielded by the market is 10%, this value is not adjusted for inflation. It is obvious that inflation decreases the purchasing power of the consumer. Let us assume, if an investor is getting constant return every year, then according to general perception, the return rate is fine. But, if we consider the inflation rate (which approximately 1.4% annually) then, those “consistent returns” are not good enough for an investment. After adjusting the inflation factor, 10% drops to 7%.

On the other hand, it is still very difficult to calculate the accurate rate of return while considering the inflation factor. This adjustment is made by using the consumer price index (CPI), and a great number of analysts have an opinion that CPI figures significantly understate the actual inflation rates.

Effect of market timing:

Therefore, another aspect that cannot be neglected is market timing. Hence,  as an investor, it is very important to evaluate the right time to invest. For example, those investors who invested in the stock market from 1996 to 2000 will have bad experiences with it. Because, the year 2000, 2001, and 2002 yielded negative returns and that too at very high rates.

Now, those investors who sold their stocks, they earned nothing practically. In fact, the suffered losses. But, the year 2003 yielded a 28.72% return. Therefore, those who sold their stocks definitely missed the trick there. It is highlighted that, bad timing can hurt your feelings and can hit you with losses.

Moreover, as we all know, the stock market offers high volatility and inconsistency. So, as an investor, what should you expect from the market? The stock market does not offer 10% every year. So don’t be baffled by this value. Hence, consider past values while estimating the expected return. Generally, “good” market years are followed by “bad” years and vice versa. Here are some tips that might help you while investing.


Hence, due to the inconsistent nature of the stock market, investing all your money in one particular category is not a wise move. Because, this increases the vulnerability towards the market fluctuations and other risk factors. Thus, as an investor, you need to diversify your portfolio. So, there are lots of other options that are more secure. For example, invest some portion of your resources in bonds. Although, bonds do not offer higher returns as compared to the stocks. Yet, they offer more stable and consistent returns and most importantly, your investment is more secure. Moreover, investing in mutual funds can be another good option for investors. Hence, it significantly diversifies the risk factors.

Be watchful:

As, the stats tell, the stock market is fairly inconsistent. No doubt, bad years are followed by good years and vice versa. Now, if you are enjoying the perks of those “good years”, be watchful for the upcoming bad years. Because, the market works this way. If you are not prudent enough and the “low return years” hit you. Then, you have lost all the advantages you had. Furthermore, you should consider other options to avoid or reduce the effect of low returns. 

Buy low, sell high:

One of the best and highly recommended activities; As far as; investing in stocks is concerned, is to “buy low and sell high”. Hence, what does that mean? It is obvious that during bad times, a lot of people get shaky or uncertain. Therefore, they start selling their stocks at lower prices to avoid further losses. This is where smart investors get in. Hence, they buy those stocks at lower prices from stressed sellers. Then, wait for the market to do better because history tells that “low return years” are always followed by “high return years”. This way, you can earn significant profits.

Stay put, stay invested:

As discussed earlier, the stock market is a volatile and risky place to invest. But, as an investor, if you are looking to make it work in the stock market. So, you should hold your investments long enough to get desired results. Investing in stocks is not a fruitful investment.

However, you are looking for short term goals. It yields better and profitable results if held for the long term. Most investors get stressed during critical times and sell their stocks at lower prices and later when prices go up, they regret their decisions and start buying again at higher prices. This is exactly opposite to the general rule “buy low, sell high”. Thus, you want to maximize your return from stocks, just stay invested.

Invest in blue-chip stocks:

Investing in blue-chips stocks is another great option. However, you are looking for consistent and increasing profits. Blue-chip stocks rarely suffer losses, or even if they do. Hence, they hit back and overcome their “occasional failures”. Blue-chips stocks are less volatile and more consistent in terms of dividends. The only possible drawback they have is they have high prices. Mostly, their price per share is more than $200 per share, Thus, some blue-chip stocks are worth more than $1500 per share. Hence, they are costly; but offer high consistency and security.


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