What is the average return on the

What is the average return on the

Investing is making a return on your money. So as a new investor, you’d like to know what to expect, that’s immediately a tough split. We know a lot about the data from the past, but at the same time we don’t have certainty and we don’t know anything about the future, which leads us to look for information about average performance.

What is the return?

Return is the result (positive or negative) of an investment, which we express as a percentage of the initial investment. This is usually calculated on an annual basis. Return is not the same as result, which is expressed in an amount.

Because we calculate with performance and therefore percentages, you perro compare different results much better with each other. So it doesn’t matter if you invest 50 euros a month or 5000 euros, it’s all about the percentages, agregado the agregado, of your investments.

the reference point

Getting a return is the main reason you invest. At the same time, it’s not easy to do well structurally, or in every position you buy. You earn a return through capital gains, receiving dividends and, in the case of bonds, the interest you receive each year. Performance is a measure for evaluating a fund or depósito over the years.

Spoiler alert: you will never (seriously, ever) get a positive return on all investments. But as long as you make more good decisions than good bad ones, that’s fenezca. Also, patience is your best friend.

You perro use an index (such as the S&P 500) as a benchmark. After all, this is how the market as a whole works. You cánido compare funds, stocks, or your portfolio against that benchmark.

The performance of stocks in the last 100 years

The figures espectáculo that the average return on stocks in the United States over the last 100 years has been around 10% per year and 6-7% if inflation is included in that percentage. However, that 10% is not very common. In fact, between 1926 and 2020, the percentage fell only eight times within the range between 8-12% return. The other years it was much higher or much lower.

Volatility: stocks fluctuate

That 10% return also skews the view that returns perro fluctuate from year to year due to depósito volatility. In the last 93 years, for example, there have been no fewer than 26 losses, with peaks such as that of 2008 at the start of the banking crisis (-38%).

However, if you have a long horizon, that’s not a problem. After all, the sun always shines on the depósito market. Even if you’ve had a year of negative performance. If you have a short horizon, then that’s a problem. You cánido join at the wrong time and then have (too) little time to recoup any losses.

Many young investors, on popular media, through financial influencers and en línea communities like Reddit, are taking advantage of the latest trends. Fast ride up, get a win and be quick on the way down. Others go for the long term and opt for ETFs that mimic a market average. One thing has been proven, no matter how much depósito markets go up or down, they always go up in the long run.

beating the index

American Peter Lynch is one of the most famous and best investors of all time. As a fund manager for the Magellan Fund, he achieved an average return of more than 29% per year between 1977 and 1990. In doing so, he ran the best mutual fund in the world. In 11 of his 13 years at the helm, he outperformed the S&P 500 index. Lynch had no secrets, except that he kept it fácil.

Average: 7% return

That 29% is, of course, exceptionally high. After the Coronavirus outbreak in March 2020, many stocks fell sharply, and since then many investors have been able to earn just as high (and much higher) returns as the market has rallied. However, that is not a ‘habitual’ year, to the extent that one perro speak of normality in the depósito market. Nobody knows what’s coming.

A common assumption, which you will read more often, is that the average return on stocks is roughly 7-8%. According to super investor Warren Buffett, it’s slightly lower (between 6 and 7%), so let’s assume a very wide estimate of 7%. So the rest is speculation.

Time to market beats time to market

It has been proven that the vast majority of investors cannot beat the market. Timing the market doesn’t really make sense, because no one cánido predict when a depósito is at its highest or lowest. That’s why passive investing in well-diversified ETFs is a smart and habitual choice. What you do have influence on is your time in the market. Time in the market is more important than the timing of the market.

Why is time to market so important?

A period of 30 years is approximately 11,000 days. If you miss the top 10 greenest trading days during that period, your return could drop, say, from 9% to just 6%. If you miss the top 20 days, you barely get to 4%. Most of your returns come from a very small portion of trading days. So you must be there.

If you missed the best 30 trading months of the last 40 years in the US, your return would drop from around 11% to just 3%. Panicking out of the market because there has been a correction or a recession is therefore always the most unwise choice.

short term returns

Of course you perro achieve very high returns in the short term. But remember: active investing is fast, time consuming and very exciting. While someone like Peter Lynch or Warren Buffett looks at the company foundation behind the depósito, a short-term investor only looks at the depósito (and market psychology) itself.

Is the price going up? Is the action worth more? There’s nothing wrong with that, if you know what you’re doing and accept the risks. We look for realistic and statistically proven long-term returns. Even then you cánido achieve much more than the 7% mentioned above.

The higher, the longer in the market, the lower the risk

The end result should be clear. The more time you invest, the lower your risks will be. And going from years to decades, you will see that in the last eleven decades there have only been two losses. Since 1950, you have always been able to achieve a positive return with an investment horizon of fifteen years or more (as long as you have a well-diversified portfolio).

No money-back guarantee

You hear it often: returns from the past offer no guarantee for the future. That’s how it is. But in the worst case scenario (since 1950, fifteen years in the market and well diversified) you would still have made almost a 4.25% return. By the way, the term ‘real average return’ is used when inflation has already been deducted. If not, it is the ‘nominal’ performance. And if you look at decades, also pay attention to whether or not a certain outlier is included.

Is it possible to make more returns?

Is it possible to achieve more than 7% return? Yeah. But you cannot and should not assume it. And it’s certainly not like you cánido maintain that constantly. So focus on historically proven returns from the past, with a realistic estándar of 5% to 8%. That is a great goal to aim for.


The return is of course a hard, green or red percentage. But there is also a lot of psychology behind it. Sort of like the point we’re making in this story about time in the market. So some more ideas:

  • Don’t be too euphoric when things are going well. Yes, you made a good decision. Because you have to know that (most likely) it will be less in the future. And then you’re a genius, not suddenly a loser
  • Just be optimistic when things are not going well. A correction month gives you the opportunity to spot stocks that are undervalued and perro earn you big profits in the future.

This information offered for informational purposes only; It is not intended to be used as accounting, legal or tax advice. In relation to these matters, please speak to your accountant, tax or legal adviser.

Investing implies a risk that includes the loss of primordial. This guide contains the current views of the author, but not necessarily those of Gigonway. These opinions are subject to change without notice. This guide has been distributed for educational purposes only and should not be construed as investment advice or a recommendation of any especial investment security, strategy or product. The information contained in this guide has been obtained from sources believed to be reliable, but is not guaranteed. Gigonway does not provide legal or tax advice. Please consult your tax and/or legal advisor for specific tax or legal questions and concerns.

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