S&P 500 Average Annual Return: The Real Number (and Why It Misleads)
Three different “averages”, one volatility tax, and a century of years that almost never land anywhere near the mean.
The three numbers people mean by "average return"
Ask "what does the S&P 500 return per year?" and you can honestly answer with three different numbers. All three are computed from the 99 calendar years since 1928 in our dataset:
- Arithmetic mean of total returns: +11.9% per year. Add up every year's total return (price + reinvested dividends) and divide by 99.
- Geometric mean (CAGR), total return: ≈ +9.8% per year. What a buy-and-hold dollar actually compounded at, dividends reinvested.
- Price-only CAGR: +6.3% per year. The index level alone — the S&P 500 went from 18 points in 1928 to 7,357 as of 2026-06-25 without counting a single dividend.
The ~2-point gap between the arithmetic mean and the CAGR is the volatility tax: losing 50% then gaining 50% averages 0% arithmetically but leaves you down 25%. The bigger the swings, the wider the gap.
"Average" is almost never the actual experience
Of 99 years, only 8 landed within ±2 percentage points of the +11.9% mean. The most common experiences are big up years and meaningful down years:
- 73 positive years vs 26 negative years — a 73% base rate of finishing up.
- Best year on record: 1954 at +52.6%. Worst: 1931 at −43.8%.
- The average intra-year drawdown is −16.2% — yet the average year still ends +8.1%. The dip is a feature, not a signal.
Recent years, for calibration
| Year | Total return |
|---|---|
| 2026 | +10.0% |
| 2025 | +17.9% |
| 2024 | +25.0% |
| 2023 | +26.3% |
| 2022 | −18.1% |
| 2021 | +28.7% |
| 2020 | +18.4% |
| 2019 | +31.5% |
| 2018 | −4.4% |
| 2017 | +21.8% |
| 2016 | +12.0% |
| 2015 | +1.4% |
| 2014 | +13.7% |
| 2013 | +32.4% |
| 2012 | +16.0% |
Should you project the historical average forward?
Be careful. The historical record embeds falling interest rates (the 10-year Treasury went from ~15% in 1981 to ~0.5% in 2020), a doubling-plus of valuation multiples (Shiller CAPE now 40.7×, vs a long-run mean of 17.5×), and U.S. market dominance. Valuation-anchored models (CAPE, AIAE) currently imply below-average forward returns — see the live valuation read.
FAQ
What is the average annual return of the S&P 500?
About +11.9% per year on an arithmetic basis (total return, 1928–2026), or roughly +9.8% compounded (CAGR). Price-only, the index compounded at +6.3%.
How often does the S&P 500 have a down year?
26 of the last 99 calendar years were negative — roughly one year in four.
What was the S&P 500's best and worst year?
Best: 1954 at +52.6%. Worst: 1931 at −43.8% (total-return basis).
All numbers computed from /api/sp500/annual-tr.json and /api/sp500/century.json, refreshed each trading day.