What is the average stock market return?

Long-run US large-cap history averages very roughly 10% a year before inflation with dividends reinvested, closer to 7% after inflation. The figure varies with the measurement window, applies to one market's past, and says little about any individual year, which is usually far above or below it.

What is the difference between average return and CAGR?

The simple average adds yearly returns and divides; CAGR is the constant rate that actually compounds to your final balance, and volatility always pushes it below the simple average (gain 50% then lose 50% averages 0% but loses 25%). Judge outcomes on CAGR.

Can I count on 10% a year for my plan?

No. It is a historical midpoint, not a forecast: decades exist with far less, fees and behavior take their cut, and inflation shrinks what the return buys. Planning tools that use ranges of outcomes (like Monte Carlo simulation) exist precisely because one number is not a plan.

Why is my portfolio's return different from the market's?

Some mix of your allocation (a diversified portfolio is not the index), your timing of deposits and withdrawals (sequence), your costs, and measurement convention (total return vs price return). Backtest your actual mix on total-return data to compare like with like.

The Average Stock Market Return (and Why You Almost Never Get It)

6 min read · Updated 2026-09-10

Ask what the stock market returns and you will hear the same number everywhere: about 10% a year. The number is real, in the sense that long-run US large-cap history averages out near it. It is also one of the most misleading facts in investing, because almost no actual year delivers anything close to average.

Real years deliver +26%, -18%, +31%, -4%. The 10% is what is left after decades of those swings cancel and compound. This guide covers where the number comes from, the three reasons your own return will differ from it, and the planning habit that survives contact with real markets: ranges, not averages.

Plan with ranges, not averages →

Where the 10% comes from

Over roughly the past century, broad US large-cap stocks have returned very approximately 10% a year on average before inflation, dividends reinvested, which is closer to 7% in purchasing-power terms (our real-vs-nominal guide covers that gap). Different windows give different answers: start or end the measurement in a boom or a bust and the long-run average moves a point or two.

So treat 10% as a rough historical center of gravity for one market, one era, measured in total return. It is not a quote, a promise, or a planning number by itself.

Almost no year is average

Here is the part the average hides: yearly returns land near 10% astonishingly rarely. Historically, only a small minority of years finish within a few points of the long-run average; the typical year is a double-digit gain or a meaningful loss. Roughly a quarter of years have been negative outright.

Where individual years actually land (illustrative share of years)

Down more than 10%

13%

Down 0 to 10%

13%

Up 0 to 10%

16%

Up 10 to 25%

33%

Up more than 25%

25%

Approximate shape of long-run US large-cap history, for intuition rather than precision: the 'average' bucket is not where most years live. Verify against real data in the backtest.

The average you are quoted is not the return you compound

There are two 'averages' and the difference costs real money to misunderstand. The simple average adds up yearly returns and divides. The compound growth rate (CAGR) is what your money actually experiences, and it is always lower when returns are volatile.

The clean example: gain 50% then lose 50%. The simple average says 0% a year. Your account says $10,000 became $15,000 became $7,500, a 25% loss, because losses and gains compound off different bases. This volatility drag is why two portfolios with the same average return but different volatility end at different balances, and why every long-run figure in these tools is a CAGR, not a simple average.

Why your personal return differs again

Even the CAGR of an index is not what lands in your account. Three wedges sit between the market's return and yours:

•Sequence: when you are adding or withdrawing money, the ORDER of good and bad years changes your outcome even when the average does not (our sequence-of-returns guide runs the retirement version, where this can make or break a plan).
•Costs: fees compound against you exactly as returns compound for you; an avoidable 1% a year consumes a large slice of a lifetime outcome (quantified in the fees guide).
•Behavior: the gap between fund returns and fund INVESTOR returns, from buying high and bailing low, has commonly been estimated at one to two points a year. The average assumes you stayed in for the below-average years; that is precisely where most people leave.

Plan with ranges, not averages

The practical conclusion is not to find a better average; it is to stop planning with a single number at all. A Monte Carlo simulation replaces '10% a year' with thousands of realistic bumpy paths and answers the question that matters: across the range of histories like ours, how often does this plan succeed? Pair it with a backtest of your actual mix so the range is anchored to real drawdowns rather than smooth assumptions.

Then the famous 10% becomes what it always was: a description of the past century's midpoint, useful for orientation, dangerous as a promise. Educational, not advice: run your own numbers, with your own mix and horizon.

Try it yourself

Monte Carlo SimulationReplace the single average with thousands of realistic paths and a success rate.Open tool →Backtest PortfolioSee your mix's real CAGR, volatility and drawdowns across decades.Open tool →Retirement Withdrawal LabTest what return sequences, not averages, do to a spending plan.Open tool →

FAQ

What is the average stock market return?: Long-run US large-cap history averages very roughly 10% a year before inflation with dividends reinvested, closer to 7% after inflation. The figure varies with the measurement window, applies to one market's past, and says little about any individual year, which is usually far above or below it.
What is the difference between average return and CAGR?: The simple average adds yearly returns and divides; CAGR is the constant rate that actually compounds to your final balance, and volatility always pushes it below the simple average (gain 50% then lose 50% averages 0% but loses 25%). Judge outcomes on CAGR.
Can I count on 10% a year for my plan?: No. It is a historical midpoint, not a forecast: decades exist with far less, fees and behavior take their cut, and inflation shrinks what the return buys. Planning tools that use ranges of outcomes (like Monte Carlo simulation) exist precisely because one number is not a plan.
Why is my portfolio's return different from the market's?: Some mix of your allocation (a diversified portfolio is not the index), your timing of deposits and withdrawals (sequence), your costs, and measurement convention (total return vs price return). Backtest your actual mix on total-return data to compare like with like.

Key terms in this guide

Plain-English definitions in the Learning Hub.

CAGR (Compound Annual Growth Rate) →Volatility (annualized standard deviation) →Monte Carlo simulation →Percentile →Total return →

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