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What is the average return of the S&P 500 last 30 years?

Published in S&P 500 Returns 2 mins read

The S&P 500 has achieved an average annual return of 9.67% over the last 30 years, specifically covering the period from 1994 to the end of 2023.

Understanding S&P 500 Returns

The S&P 500 is a stock market index that represents the performance of 500 of the largest publicly traded companies in the United States. It is widely regarded as one of the best gauges of large-cap U.S. equities and the overall health of the American stock market. Understanding its average return over various periods provides valuable insight into long-term market trends and potential investment growth.

Historical Performance Overview

While the 30-year average provides a comprehensive long-term view, it's insightful to compare it with other periods to understand the variability of market performance. The following table illustrates the average annual returns of the S&P 500 over different durations ending in 2023:

Period (start-of-year to end-of-2023) Average Annual S&P 500 Return
15 years (2009-2023) 12.63%
20 years (2004-2023) 9.00%
25 years (1999-2023) 7.18%
30 years (1994-2023) 9.67%

As seen, while the 30-year average is robust, shorter periods can exhibit higher or lower average returns due to market cycles, economic conditions, and significant events.

What This Means for Investors

The average annual return over a long period like 30 years offers several key insights for investors:

  • Long-Term Growth Potential: The consistent positive average return demonstrates the S&P 500's historical capacity for substantial long-term growth, which is a cornerstone of wealth accumulation through investing.
  • Power of Compounding: These average returns, when compounded over decades, can lead to significant wealth. Even modest annual returns can grow substantially over time due to the effect of earning returns on previously earned returns.
  • Volatility vs. Averages: While daily, monthly, or even yearly returns can be highly volatile, the long-term average tends to smooth out these fluctuations, highlighting the market's upward bias over extended periods.
  • Benchmark for Diversification: For many investors, the S&P 500's performance serves as a benchmark. Investing in a diversified portfolio that includes S&P 500 index funds or ETFs is a common strategy to capture this market-wide return.

Understanding these historical averages helps investors set realistic expectations and appreciate the importance of a long-term perspective when investing in the stock market.