The Average Annual Return in the Stock Market

by Carol Deeb ; Updated April 19, 2017

Investing in the stock market takes some knowledge and research about the securities you want to buy. The prices of stocks can fluctuate, so reviewing the market's performance over time gives you an idea of where prices might be headed. However, it's not possible to predict the future, so there is never a guarantee of profits. Stock market average annual returns can be analyzed in various ways to help you decide if it's the right investment for you.


If you plan to invest in the stock market, you may hear various opinions from your relatives, friends and financial professionals about the profits you can make from the rising prices of different securities. Sometimes the advice is not objective. Your family and acquaintances may not have information about anything other than the stocks they purchased. Stock brokers can try to convince you to buy to reap the benefits of commissions. Therefore, do our own research using reliable and credible sources that don't have vested interests in what you purchase.


Reviewing historical average annual returns gives you a big picture of the stock market over an 83-year period, as of the date of publication. In some 12-month cycles, the stock market, as a whole, earned increases of over 40 percent. However, in other years, investors experienced an average loss of about 4 percent to over 50 percent, depending on the year and the health of the economy. According to a report by New York University Leonard N. Stern School of Business, the historical average annual return for stocks from 1929 to 2010 is about 9 percent. When factoring in the return on Treasury bills, the average is 5.67 percent.


Recent average annual returns tell a different story than the historical percentage rates. In 2010, the NYU report shows that the average return on stocks alone was almost 15 percent, while Treasury bills were under one-fifth of 1 percent and bonds almost 8.5 percent. However, in the decade from 2001 to 2010, the average return on stocks and Treasury bonds together was a loss of almost 1 percent. Your return depends on the type of security that you are holding and the 12-month period in which you invest.

Risk Strategy

Because the average annual return in the stock market varies from year to year, you can mitigate your risk by forming a strategy based on historical and recent returns. Diversification between stocks, Treasury bills and Treasury bonds may give you the best overall return if you plan to hold your investments. If you seek a high return, then your risk factor also will be higher. The stocks, bills and bonds that increase steadily over time generally give lower returns, but less risk is involved. Also, buying stocks as they fall or after a crash reduces your investment amount and may lead to a higher return.

About the Author

Carol Deeb has been an editor and writer since 1988. Her work has appeared in magazines, newspapers and online publications, as well as a book on education. Deeb is a real-estate investor and business owner with professional experience in human resources. She holds a Bachelor of Arts in English from San Diego State University.