The S&P 500's “Average” Return Is Rarely What Actually Happens in a Given Year

Written by Greg, founder of FTMarketWatch — a former licensed commodities trader, self-directed investor since. Not a licensed financial advisor.

Citation: Damodaran, A., NYU Stern School of Business — “Annual Returns on Stock, T.Bonds and T.Bills: 1928–Current” (updated annually). View source →

Study Overview

This is a freely published, widely cited dataset of official annual S&P 500 total returns (including dividends) going back to 1928, compiled and updated each year by NYU Stern finance professor Aswath Damodaran.

Methodology Summary

The dataset compiles each calendar year's official S&P 500 total return figure (price change plus dividends), allowing simple or geometric averages to be calculated over any chosen time period.

Key Findings

The long-run average annual return, with dividends reinvested, from 1928 through the mid-2020s works out to roughly 10% per year in nominal terms (before adjusting for inflation).
That average, however, is rarely what actually happens in any single year: of the 97 years in the dataset through 2024, only a small handful landed within a percentage point or two of the long-run average.
The index has finished a calendar year with a loss in roughly 1 out of every 4 years historically, while posting a gain of 20% or more in roughly 1 out of every 3 years — both outcomes are more common than a year landing close to the average itself.

Limitations

This figure is nominal (not adjusted for inflation); the long-run real (inflation-adjusted) return has historically been meaningfully lower, often cited in the 6–7% range depending on the exact period measured.
A long-run historical average, by definition, blends very different market environments together — someone who started investing in a strong decade will have experienced very different results than someone who started right before a weak one, even though both technically “experienced the S&P 500.”
Past long-run averages are not a guarantee of future results.

Practical Meaning

The main practical lesson isn't the 10% figure itself — it's that any single year (including this one) should be expected to look quite different from that average, in either direction. Judging your own portfolio's performance against a flat 10% year-by-year benchmark, rather than over a full market cycle, can create misleading expectations.