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Annual Stock Market Returns by Year


Annual Stock Market Returns by Year

Looking at how the stock market performed in the past can help you figure out your investing plan. By checking the history, you can see how the market reacted when things got uncertain and how it got back on track later. On average, the stock market has given around 10% each year or about 7% when you consider how prices change over time. For folks investing for the long haul, seeing the yearly stock market returns from the past can guide how they handle their investments.

At the end of this piece, you'll see a table showing how the stock market performed each year for the S&P 500 index from 1980 to 2021.

Key Takeaways

  • For a long time, the stock market has mostly shown gains overall, even with occasional drops in prices.
  • A decrease in prices of less than 10% from the previous high is referred to as a "market correction."
  • Bear markets happen when index prices drop by 20% or more.
  • Long-term wealth grows by remaining invested in the market, choosing good stocks, and steadily adding more money over time.

How Often Does the Stock Market Lose Money?

Negative stock market returns happen, but looking at historical data shows that positive years are more frequent than negative ones.

For instance, the 10-year average return of the S&P 500 Index as of March 3, 2022, was around 12.1%. In a single year, the return might differ significantly from this long-term average due to yearly fluctuations. Over a span of 10 years, although the overall index might show growth, there could be individual years with declines.

During periods of market volatility or negative trends, the media often discusses market corrections and bear markets. A market correction means the stock market dropped by less than 10% from its recent peak. Corrections might occur within a year and may recover by year-end, not showing as an overall negative return for the calendar year.

A bear market happens when the market falls by over 20% from its recent high for at least two months. These bearish periods can last varying durations, but on average, they span around 289 days.

Even in times of market correction or bear markets, like the one in 2020, it doesn't necessarily mean the year will end negatively. In 2020, although the market entered a bearish phase in March, it concluded the year with a rise of over 18%.


The way returns happen can change from one decade to another. When you retire, there might be a situation where your investments face a series of bad years at the start of your retirement. Financial experts call this sequence risk. It's essential to understand that while you might experience some tough years, it doesn't mean you shouldn't invest in stocks. Instead, it's important to be realistic and have reasonable expectations when you invest.

Time in the Market vs. Timing the Market

The stock market can have tough times, but how it affects you depends on whether you stay invested or pull out. If you have a long-term investment view, you might still see good returns over time. But if you decide to invest and then sell after a bad year, you might face a loss.

For instance, in 2008, the S&P 500 dropped by around 37%. If you invested $1,000 in an index fund at the start of that year, by the end, you would have had about $630 left. But remember, this is only on paper. You would've only realized the loss if you sold your investment at that time.

However, it might have taken many years for your investment to recover. For instance, by 2009, the market rose by 26%, but your investment would only be about $794, still less than your initial $1,000. Even in 2010, with another 15% increase, your money would have grown to around $913, still not reaching your starting point.

It wasn't until 2012, with an increase of 16%, that you would have finally exceeded your original $1,000 investment, ending up with about $1,080. This shows that staying invested during downturns can eventually lead to recovery and potential gains over time.+


If you kept your money in the market during the 2008 downturn, it wouldn't have been as damaging. But if you sold your investments and moved your money to safer options, it might not have been able to recover its value in that same period.

Investing in the stock market comes with uncertainties. Nobody can predict when bad times might hit, so if you're not ready to stay invested when the market goes down, you might consider staying away from stocks or be prepared for potential losses. Trying to time the market perfectly to avoid downturns rarely works.

If you do decide to invest in stocks, it's crucial to expect periods of losses. Once you accept this reality, it becomes easier to stick to your long-term investment plan.

The good news is that despite the risks, investing in America's financial markets can lead to significant wealth over time. Staying committed to your investments for the long run, regularly adding to them, and managing risks wisely can help you reach your financial goals.

However, using the stock market to get rich quickly or taking reckless risks is not a reliable strategy. If making big money in a short time was easy, everyone would do it. Don't fall for the idea that short-term trading is the best way to build wealth.

Calendar Returns vs. Rolling Returns

Investors often don't put money in the market at the start of the year and take it out at the end. However, when we hear about market returns, it's usually on a yearly basis.

Another way to consider returns is by looking at rolling returns. This means examining the market's performance over consecutive 12-month periods. For instance, you could check returns from February of one year to January of the next, March to February, or April to March, and so on. This method offers a broader perspective on how investments perform over different time frames.


Take a look at graphs showing historical rolling returns to get a broader view beyond just one year. These graphs illustrate how investments perform over consecutive periods of 12 months, offering a longer-term perspective compared to just looking at yearly results.

Historical S&P 500 Index Stock Market Returns


Frequently Asked Questions (FAQs)

What are the average returns of the stock market long term?

On average, the stock market tends to grow by around 10% each year. However, this rate can change a lot from year to year due to various factors affecting the market.

How do I get bigger returns from the stock market?

If you want to exceed the average stock market growth, you might need a more aggressive investment plan. This involves investing in things like international stocks, small or mid-sized company stocks, and growth-focused stocks. These options have greater potential for growth, but they also come with higher risks. It's important to talk to a financial advisor about your goals. They can help you figure out the best mix of investments for a strategy focused on aggressive growth.

How do I predict future stock market returns?

Looking at past market performance can help you make predictions, especially for longer time frames. But it's impossible to perfectly predict big market ups and downs. Being ready for potential losses and managing risks is crucial.

The Balance doesn't offer tax, investment, or financial services or advice. This information is provided without considering individual investors' goals, risk tolerance, or financial situations. It might not be suitable for everyone. Remember, what happened in the past doesn't guarantee the future. Investing always carries risks, including the chance of losing the money you've invested.

Written by Sauravsingh

Techpreneur and adept trader, Sauravsingh Tomar seamlessly blends the worlds of technology and finance. With rich experience in Forex and Stock markets, he's not only a trading maven but also a pioneer in innovative digital solutions. Beyond charts and code, Sauravsingh is a passionate mentor, guiding many towards financial and technological success. In his downtime, he's often found exploring new places or immersed in a compelling read.

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