Chart of the Day: What Have Stock Market Returns Been Over the Past 90 Years?

Apr 09, 2015
Question of the Day, Research, Index Funds, Investing, Stocks, Current Events, Chart of the Week

From Big Picture blog:


Description:  This chart shows the distribution of annual returns for the S&P500 (or its equivalent) from 1926-2014 (89 years).  For example, there were 6 years where the S&P returns were between 18-20% as you can see by the height of the bar between 18-20%.

Ask students to analyze the chart and provide at least three insights gleaned from the data. Here are a few that I noticed (and send me along any additional ideas!):

  • Of the 89 years analyzed, 65 (or 73%) of the years had positive returns.  The bias in the market has been a positive one historically.  You can also see this based on the three return numbers above the chart.
  • While we often say that the stock market (usually represented by index like the S&P500) has returns of 8-10%, none of the years in the sample set had a return between 8-10%.
  • The shape of this chart provides a reminder that returns are volatile on an annual basis. You can see this as evidenced by the height of the bars on the positive and negative extremes.  You need to have a strong stomach to invest in the stock market to ride the ups and downs.
  • The most frequent return (as noted by the highest bar) over this period was greater than 34%.
  • With an interest rate of 10%, based on the rule of 72, you double your money every 7+ years.
    • Thanks to Art for pointing out this error!


Check out the NGPF Lesson on Investment Strategies

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.