The S&P 500's "Average" Year Almost Never Happens. Here's How Often It Actually Lands Near 10%.

The S&P 500 (SNPINDEX:^GSPC) has a well-earned reputation as a long-term compounder. In the 69 calendar years from 1957 through 2025, it gained around 10.6% annually with dividends reinvested, according to yearly return data gathered by NYU Stern professor Aswath Damodaran.

With a long-run number like that, it'd be easy to think a typical year looks close to 10%. But that year almost never happens.

From the same data, I counted how many years ended with a total return between 8% and 12%. Just four did: 1968, 1993, 2004, and 2016. Meanwhile, 15 years lost money, and 25 finished up over 20%.

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A lopsided spread

Sort all 69 years by their returns, and more of them sit above the average than below it. Thirty-nine years finished over 12%. Twenty-six ended under 8%, including the 15 losing years. That leaves just the four in the middle.

The extremes are wide, too. The best year in the period was 1958, when the index returned around 44% with dividends. The worst was 2008, when it fell about 37% in the financial crisis.

Notably, the index climbed over 20% in five straight years from 1995 through 1999, then dropped in each of the next three.

Even widening the range to 5% to 15% only catches 14 of the 69 years, or around one in five.

The recent record looks the same. After 2016's return of around 11.8%, the index climbed about 18% or more in seven of the next nine years. It fell in the other two, 2018 and 2022.

Losing years do the damage

Why doesn't the average year look like the typical year? The median year (the one right in the middle when all 69 are sorted) returned around 15% -- far above the 10.6% long-run number.

But losing years can be big ones, and a big loss takes an even bigger gain to recover. The 37% fall in 2008, for example, needed a gain of almost 58% just to break even. Losses like that pull the long-run compound return down to around 10.6%.

In other words, 10% has arguably never been a forecast for any one year. It's what lots of good years and a few bad ones have added up to.

Long stretches pull returns toward 10%

Stretch the time frame out, though, and the average starts to show up. I measured the yearly return, with dividends reinvested, for every rolling five-year, 10-year, 20-year, and 30-year period in Damodaran's data.

Five years didn't help much, because just 10 of 65 five-year periods landed between 8% and 12% a year, and six of those lost money.

Longer stretches did better. Over 10-year periods, the yearly return landed in the range in 13 of 60 cases, or around 22% of the time. Over 20-year periods, it was 27 of 50, a bit over half. And over 30-year periods, it was 30 of 40, or three quarters.

The spread of results narrowed along the way. Even a decade wasn't always enough, because the 10 years from 1999 through 2008 lost around 1.4% a year, in a decade that covered both the dot-com crash and the financial crisis. But the worst 20-year run, 1999 through 2018, still returned around 5.6% a year. And every 30-year period gained between around 9.6% and 13.6% a year.

Put another way, the 10% number mainly describes what happens over decades, not years -- and even then, the index's valuation when a stretch starts can move the result far above or below it.

What should investors expect from one year?

2026 is a good example of how far from 10% a single year can drift. As of this writing, the S&P 500 is up around 14% for 2026 with dividends reinvested, above the 8%-to-12% range with about 10 weeks left.

A small pullback could still move it into the range. But a deeper one could put it into the loss column, and another strong run could lift it past 20%.

For a buy-and-hold investor in the index, I think about 10% a year is a sensible number to plan around over 20 or 30 years. I just wouldn't rely on it in any given year, or even in any five-year stretch.

Going by this history, a 25% gain in one year and a loss in the next would both be pretty normal results.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.