What was the average annual stock market returns over the past 5 years? How about for the past 20 years? What was the return for a 60/40 stock and bond mix portfolio? There are a lot of numbers thrown around on how stocks have done – and will do in the future. Let’s dig through the noise and see what the actual data tells us.

The Truth About Stock Market Returns

 

What portfolio investments are we looking at?

Three Different Investment Portfolios minFor this post I reviewed data for three different portfolio mixes:

  1. 100% invested in a Total US Stock Market Fund
  2. 80% in the same Total US Stock Market Fund and 20% in a Total US Bond Fund
  3. 60% in the same Total US Stock Market Fund and 40% in a Total US Bond Fund

The reason I’ve looked at these three portfolios is that few people are invested 100% in stocks.


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Financial writers and speakers love to talk about “the market” but your results may not match what they’re talking about. If you have bonds mixed in with your stocks you’ll see a different average rate of return. Similarly, if you mix in some International Stocks or a Small Cap Fund, etc. Since the portfolio options are unlimited, I decided to focus on “the market” and two very common stock/bond ratios.

Timelines

In addition to three different portfolios, we’re looking at six different timelines. We’re looking at the most recent 12 months, and then the 5, 10, 15, 20, and 30 years leading up to the time of writing this post.

Why?

Length of time invested matters, as you’ll see shortly.


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First a warning

I feel the need to remind you of two things.

1. Past performance does not guarantee future results. It’s great for looking at trends and perhaps estimating what the future might hold, but nothing is ever guaranteed.

2. The shorter your investing timeline, the wilder the results may vary. Looking at rolling returns (I explained rolling returns in another post) 1-year results have HUGE swings but 40-year results have a much smaller range of results. So the shorter your investing horizon, the harder it is to estimate what your returns might be.

Here’s a chart of the all previous 1-year stock market returns

One-Year Historical Rolling Returns (S&P 500)