S&P 500 Average Returns and Historical Performance

Behind these average gains lies a rich history of bull and bear markets, devastating crashes and remarkable recoveries, and major shifts in the kinds of companies found in the index. From the postwar boom of the 1950s to today’s tech-driven market, the index has weathered recessions, inflation spikes, market bubbles, and global crises. A $100 investment in 1957 would have grown to over $96,000 by September 2025. However, that path wasn’t smooth, and when adjusted for inflation, that same investment would be worth about $8,300 in real purchasing power in 2025.1

Understanding the S&P 500’s historical performance isn’t just an academic exercise. It provides crucial context for investors deciding how best to utilize sophisticated online broker platforms to prepare for their financial futures through investing. Whether you’re planning for retirement, saving for college, or building long-term wealth, the index’s patterns of returns offer valuable lessons about market behavior, risk management, and the power of compound interest.

Key Takeaways

• The S&P 500 is a market capitalization-weighted index of the 500 leading publicly traded companies in the United States.

• Since 1957, the S&P 500 has delivered an average annual return of 10.54%, but when adjusted for inflation, the real return drops to 6.68%.

• While timing the market is risky, dollar-cost averaging—investing fixed amounts regularly regardless of market conditions—can help reduce the impact of market volatility.

• The returns for the index are increasingly due to fewer firms, a concern given that many use the S&P 500 for diversification.

• Investors cannot directly invest in the S&P 500. Instead, they can add the SPY ETF or other S&P 500 index funds to their portfolio, a financial instrument that closely tracks the S&P 500. Leading online broker platforms often offer access to this ETF.

What Is the S&P 500 Index?

The S&P 500 is a market capitalization-weighted index of the 500 leading publicly traded companies in the U.S. The index is overseen by Standard & Poor’s Dow Jones Indices, a division of S&P Global Inc. (SPGI). While it took on its present size (and name) in 1957, the S&P dates back to the 1920s, when it was a composite index tracking 90 stocks.2 The average annualized return from 1928 to the third quarter of 2025 was 10.11%. Adjusted for inflation, the real average annualized return for the same period is 6.84%.1

Below are the returns over different periods going backward from the present day:

S&P 500 Returns

Table with 2 columns and 7 rows. (column headers with buttons are sortable)

CAGR is compound annualized growth rate, a measure of the annualized (or average annual) returns. On the other hand, total returns account for the percentage gains compounding. The total returns gives you an expectation of what you might earn having invested for a given number of years; the CAGR gives you various expectations for how much you might earn in a given year. Of course, using both rates, you need to understand that past performance is not determinative of future results.

Table: Investopedia/Peter GrattonSource: TradingView

The History of the S&P 500

The history of the S&P 500 tells the story of America’s economic ups and downs:

Postwar boom (1957–1969): After World War II, America had an unprecedented economic expansion. During this period of prosperity, the index climbed steadily, reaching about 800 points, reflecting the nation’s growing industrial might and rising middle class.

Important

Each major decline in the S&P 500’s history has been followed by an eventual recovery, though the time frames have varied significantly.

Stagflation (1970–1981): The index faced strong headwinds during this time, dropping below 360 points. This decline came as inflation and economic stagnation (nicknamed “stagflation”) worried investors.

The S&P 500 1970 to 1980

This era was marked by economic stagnation, high inflation, and rising oil prices, the last of which led to the 1973–74 bear market and a severe recession. After the deep economic downturn of the last half of the 1970s, aggressive U.S. Federal Reserve action in the late 1970s to early 1980s helped spark a bull market after 1982.

Internet Boom and Bust (1990–2002): The rise of the internet drove the index to new heights in the late 1990s, but the dot-com bubble burst led to a sharp decline in the early 2000s.

S&P 500 1990 to 2002 

During this period, markets experienced substantial growth, fueled by economic expansion, rising tech stocks on the Nasdaq, and increased globalization, culminating in the longest bull market yet recorded. Bookended by Black Monday and the dotcom crash, the era ended with the dotcom bubble, as overvaluation in tech stocks led to a market peak in early 2000, followed by a sharp decline.

Financial Crisis (2007–2009): During what became known as the Great Recession, the index had its worst fall, dropping nearly 57% from October 2007 to March 2009.

The long recovery (2009–2020): After 2009, the market entered its longest bull run in history, rising 330% over 10 years.

S&P 500 2007 to 2020

The financial crisis of 2008–09 was followed by a slow, cautious recovery that then accelerated in the 2010s, buffeted by tech stocks. The 2010s were marked by the rise of the big tech companies like Apple and Facebook (now Meta).

The pandemic and post-pandemic period (2020s): The COVID-19 pandemic briefly interrupted this rise in 2020 with a sharp 15% drop, but the market recovered quickly. By 2021, the index hit several record highs before experiencing significant volatility in 2022. The market showed resilience again in 2023, staging another recovery, rising to all-time highs in 2024 and again in 2025, before volatility hit the markets on the heels of recession fears and the Trump tariffs.

S&P 500 in the 2020s

The markets have been marked by extreme volatility, starting with a sharp COVID-19-driven bear market that quickly rebounded into a powerful bull market due to massive stimulus efforts and low interest rates. In 2022, however, markets faced significant headwinds from inflation, rising interest rates, and geopolitical tensions. The market rose again until 2025, when the Trump tariffs cause a significant amount of market volatility.

How Inflation Affects S&P 500 Returns

The long-term average annual return from the S&P 500 over the last century, 10.11%, is only part of the story. After adjusting for inflation, the real return drops to about 6.84%.3 Thus, while your money is growing, its purchasing power isn’t increasing as much as the headline number suggests.

Below, we show the difference visually. We use an index value of 100 (not the value of the S&P 500 index, but a hypothetical starting point to depict the change over time) and show how it adjusts, with inflation and without, over time:

How Market Timing Affects S&P 500 Returns

When looking at the returns for the S&P 500, it’s important to keep in mind that your returns could be vastly different depending on when you invested. For example, investors who had bought shares in the SPDR S&P 500 ETF Trust (SPY), which tracks the index, would be pleased to have had a substantial appreciation in value over the last decade.

But if the same people had invested during the biggest dips in 2020 or 2022—or worse, exited at either year’s lows—their returns would look far worse.

Tip

For most advisors, the best way for less experienced investors to time the market is not to do so at all. Dollar-cost averaging is a way to give yourself a better likelihood of long-term gains.

Instead of trying to time the market, many financial advisors recommend dollar-cost averaging—investing a fixed amount periodically, no matter the market conditions. This strategy helps avoid the risk of investing all your money at market peaks.

Investors who buy during market lows and hold their investment or sell at market highs will experience larger returns than those who buy during market highs, particularly if they sell during dips. Below, our chart shows the effect of using dollar-cost averaging for the 20-year period from 2004 to 2024. You can see the significant growth, despite the market crises of 2008 and 2020, among other bearish moments in this period.

$50 Invested Monthly for 20 Years in the S&P 500 Index

This chart represents the growth of $50 invested each month over 20 years from 2004 to 2024. This is a conservative estimate, accounting for ETF fees and taxes that would eat at your gains. We also assumed an unlikely scenario where you stayed at the $50 level each month, despite inflation and other changes in your life, though we assumed you prudently reinvested your dividends.

How the S&P 500’s Components Affect Your Returns

It’s often said that when you invest in the S&P 500, you’re investing in a broad market index and getting the benefits of diversification. While true, the returns of the S&P 500 have become increasingly beholden to a relatively few companies. That means if a few major companies have a rough year or more, it would greatly affect your returns.

As such, this concentration of influence has important implications for investor returns.

23%

In 2024, our analysis shows that NVIDIA alone accounted for almost a quarter of the S&P 500 growth in market capitalization.

The Bottom Line

The S&P 500’s history tells a compelling story of American economic growth, though not without its dramatic ups and downs. While its long-term average return of 10.54%—or 6.68% after inflation—has created substantial wealth for long-term investors, today’s market is shifting. The unprecedented concentration in top technology companies—accounting for a third of the index’s value—is a historic transformation from its more diversified past.

While the index has proven resilient over long periods—it remains the premier benchmark with which to compare other investments—success requires patience through market cycles and disc