The Average Return Of The US Stock Market 

History teaches us that the stock market generates average annual returns of 8-10%. And so it’s perfectly natural for investors to form expectations that prices will mostly trend steadily higher throughout any given year. 

But it can also be pretty unsettling to watch the stock market have years where it returns significantly below or above the path that gets you to that average return (see graph below).

If you look at the individual years that make up this average, the range of yearly returns are all over the place!

Zooming out

It’s fair to expect average annual returns over the lifetime of your investment in the stock market. But don’t expect average returns for each individual year. That would set you up to be overly disappointed in below-average years, and perhaps overly worried about froth in above-average years.

It is best to be mindful of the fact that average returns are only realised after combining multiple years of performance, which will include some below-average years and above-average years.