Ten Percent Returns

Bill Parrott |

The S&P 500 has generated ten percent annual returns since 1926. A dollar invested in 1926 is now worth  $13,474.[1]  Because of the 97-year average, most investors expect or demand a 10% return each year without risk. In fact, when analysts update their annual stock market return projections, the answer is usually 10%, a safe prediction because of the index's history.

Generating index returns is a mix of euphoria and despair. From 1982 to 1999, the index averaged 18.5% per year. From 2000 to 2012, it averaged a paltry 0.6%. After World War II, the best one-year return was in 1954, when it soared 52.6%—the worst year occurred in 2008, plummeting 37%.[2] However, you must endure a few years of pain and underperformance to receive double-digit stock returns. It would be nice to time the market to avoid the dips, but it's impossible.

The  S&P 500 is up 17.25% this year after falling 18.1% in 2022. What is the ten-year average return for the index? It is 10.35% despite the correction in the fourth quarter of 2018, last year's drop, and the COVID crash in 2020. Since July 2013, the index has risen 168%.

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As we move into the second half of this year, focus on your long-term goals and less on stock market returns. The market has delivered exceptional returns for decades, and I expect the future will also. Of course, it will rise in some years and fall in others. As it increases, don't get overly excited or too depressed when it falls. In the long run, a well-diversified portfolio can produce market returns; if you capture them, you'll do well.

I'm optimistic about the market's future – stay invested, my friends!

It's a wonderful thing to be optimistic. It keeps you healthy, and it keeps you resilient. ~ Daniel Kahneman

July 13, 2023

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM's custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on your asset level.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren't suitable for every investor. Prices and yields are for today only and are subject to change without notice.




[1] Dimensional Fund Advisors Returns Web – 1/1/1926 to 60/30/2023

[2] Ibid