Why You Should Expect More Than 8% a Year From Stocks
I’m talking double-digit returns — 11.56% to be exact
There seems to be no agreement on how much the stock market returns on average each year. Some say 8%, I’ve seen others say 7%. There are conservative numbers like 6% or high expectations such as 10%. I personally would use 8% as the number I expect the market to return each year. But not anymore.
Over the last ten years, the S&P 500 has provided an annual return of 11.56%. There is reason to believe this annual 11.56% average can continue for the foreseeable future.
The Numbers
I went through Yahoo Finance and found the closing price of the S&P 500 for the last trading day of the year, for every year, from 2010 to 2020. That is 11 data points, one for each year. Using a simple formula in Excel, I found the CAGR (Compound Annual Growth Rate) of the investment. The S&P 500 had returned 11.56% year over year growth for the ten year period.
I also provided the return from one year to the next. So in 2020 the S&P 500 returned 16.26%, in 2019 it returned 28.88%, etc.
