What Is the Average Index Fund Return? | The Motley Fool (2024)

FAQs

What Is the Average Index Fund Return? | The Motley Fool? ›

The average stock market return is about 10% per year, as measured by the S&P 500 index. In some years, the market returns more than that, and in other years, it returns less. The S&P 500 index comprises about 500 of America's largest publicly traded companies and is a benchmark for annual returns.

The average stock market return is about 10% per year, as measured by the S&P 500 index. In some years, the market returns more than that, and in other years, it returns less. The S&P 500 index comprises about 500 of America's largest publicly traded companies and is a benchmark for annual returns.

Attractive returns: Like all stocks, major indexes will fluctuate. But over time indexes have made solid returns, such as the S&P 500's long-term record of about 10 percent annually. That doesn't mean index funds make money every year, but over long periods of time that's been the average return.

How to invest with us. The Motley Fool 100 Index ETF was rated against the following numbers of Large Growth funds over the following time periods: 1,117 funds in the last three years and 1,035 in the last five years. Past performance is no guarantee of future results.

S&P 500 5 Year Return is at 54.51%, compared to 57.45% last month and 71.33% last year. This is higher than the long term average of 44.37%.

While the index is not immune to overall market downturns, long-term investors have historically earned a nearly 10% average annual return. However, as with all investments, it's important to note that past performance can't be used to predict future results.

80% of your portfolio's losses may be traced to 20% of your investments. 80% of your trading profits in the US market might be coming from 20% of positions (aka amount of assets owned). 80% of the US stock market capitalisation comes from around 20% of the S&P 500 Index.

Ideally, you should stay invested in equity index funds for the long run, i.e., at least 7 years. That is because investing in any equity instrument for the short-term is fraught with risks. And as we saw, the chances of getting positive returns improve when you give time to your investments.

S&P 500 1 Year Return is at 1.15%, compared to 0.91% last month and -1.71% last year. This is lower than the long term average of 6.29%. The S&P 500 1 Year Return is the investment return received for a 1 year period, excluding dividends, when holding the S&P 500 index.

Do rich people invest in index funds? ›

Some millionaires are all about simplicity. They invest in index funds and dividend-paying stocks. They seek passive income from equity securities just like they do from the passive rental income that real estate provides. These millionaires simply don't want to spend their time managing investments.

Is an S&P 500 index fund a good investment? As long as your time horizon is three to five years or longer, an S&P 500 index fund could be a good addition to your portfolio.

Our recommendation for the best overall S&P 500 index fund is the Fidelity 500 Index Fund (FXAIX). With a 0.015% expense ratio, this fund is the cheapest one on our list.

Over the years, that money can really add up: If you kept that money in a retirement account over 30 years and earned that average 6% return, for example, your $10,000 would grow to more than $57,000.

Comparison to S&P 500 Index

To help put this inflation into perspective, if we had invested $8,000 in the S&P 500 index in 1980, our investment would be nominally worth approximately $912,320.82 in 2023. This is a return on investment of 11,304.01%, with an absolute return of $904,320.82 on top of the original $8,000.

Basic Info. S&P 500 10 Year Return is at 156.3%, compared to 161.0% last month and 215.4% last year. This is higher than the long term average of 112.6%.

Index fund investing might not seem as exciting as buying individual stocks, but that doesn't mean they can't build wealth effectively. It is possible (even likely) to build a million-dollar retirement nest egg using nothing but index funds.

How long has it historically taken a stock investment to double? NYU business professor Aswath Damodaran has done the math. According to his math, since 1949 S&P 500 investments have doubled ten times, or an average of about seven years each time.

If you're new to investing, you can absolutely start off by buying index funds alone as you learn more about how to choose the right stocks. But as your knowledge grows, you may want to branch out and add different companies to your portfolio that you feel align well with your personal risk tolerance and goals.

Absolutely. In fact, they may be your best bet to retire rich.

What is the 4% index fund rule? ›

The 4% rule means one can withdraw $4,000 annually for every $100,000 in the portfolio, increasing each year with inflation. This equates to estimating a 90% chance it would last for at least 30 years.

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at. Rather, you should consider the number of different sources of risk you are getting with those ETFs.

As a result, $10,000 in AAPL stock purchased 20 years ago would be worth about $7.51 million today, assuming reinvested dividends.

Data source: Author's calculations. As you can see from the chart, investing $5,000 annually in the S&P 500 would make you a millionaire in a little over 30 years, assuming average 10.25% annual returns.

Legendary investor Warren Buffet once said that all it takes to make money as an investor is to 'consistently buy an S&P 500 low-cost index fund. ' And academic research tends to agree that the S&P 500 is a good investment in the long term, despite occasional drawdowns.

The index acts as a benchmark of the performance of the U.S. stock market overall, dating back to the 1920s. The index has returned a historic annualized average return of around 11.88% since its 1957 inception through the end of 2021.

Stock Market Average Yearly Return for the Last 30 Years

The average yearly return of the S&P 500 is 9.773% over the last 30 years, as of the end of April 2023. This assumes dividends are reinvested. Adjusted for inflation, the 30-year average stock market return (including dividends) is 7.085%.

S&P 500 3 Year Return is at 37.30%, compared to 43.16% last month and 50.15% last year. This is higher than the long term average of 22.95%. The S&P 500 3 Year Return is the investment return received for a 3 year period, excluding dividends, when holding the S&P 500 index.

Buffett bet that over 10 years, an S&P 500 index fund would outperform five actively managed hedge funds. His investment, the Vanguard 500 Index Fund Admiral Shares (NASDAQMUTFUND:VFIAX), not only won, but it trounced the competition -- earning returns of nearly 126% while the hedge funds averaged just 36%.

B -0.44%) shareholders, he wrote that his will recommends that most of the cash that goes to his family be put in a low-cost S&P 500 index fund. But does Buffett own any index funds himself? The answer is yes. Here are the only two index funds in Buffett's portfolio -- and how they could make you money.

Do millionaires use index funds? ›

Ultra-rich investors may hold a controlling interest in one or more major companies. But, many millionaires hold a portfolio of only a few equity securities. Many may hold index funds since they earn decent returns and you don't have to spend time managing them.

They're low-risk: Any fund offers the safety of diversification. With 500+ stocks in their portfolio, S&P 500 funds are especially diversified, their securities representing a range of industries.

Investing in the S&P 500

You can't directly invest in the index itself, but you can buy individual stocks of S&P 500 companies, or buy a S&P 500 index fund through a mutual fund or ETF. The latter is ideal for beginner investors since they provide broad market exposure and diversification at a low cost.

Fund description

The Invesco S&P 500® Downside Hedged ETF (Fund) is an actively managed exchange-traded fund (ETF) that seeks to achieve positive total returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns.

Performance and Cost. As the innovator of index funds, Vanguard offers an impressive range of index funds today with low expense ratios. Fidelity has a comparable selection of funds, but its fees generally aren't as competitive as Vanguard's. That said, Fidelity does offer some zero-cost funds for its own customers.

Basic Info. S&P 500 1 Year Return is at 1.15%, compared to 0.91% last month and -1.71% last year. This is lower than the long term average of 6.29%. The S&P 500 1 Year Return is the investment return received for a 1 year period, excluding dividends, when holding the S&P 500 index.

S&P 500 Annual Total Return is at -18.11%, compared to 28.71% last year. This is lower than the long term average of 9.29%. The S&P 500 Annual Total Return is the investment return received each year, including dividends, when holding the S&P 500 index.

Over the past 30 years, the S&P 500 index has delivered a compound average annual growth rate of 10.7% per year. Data source: Slickcharts.com.

What is the 10 year return of the S&P 500? ›

S&P 500 10 Year Return is at 156.3%, compared to 161.0% last month and 215.4% last year. This is higher than the long term average of 112.6%.

Stock Market Average Yearly Return for the Last 20 Years

The historical average yearly return of the S&P 500 is 10.05% over the last 20 years, as of the end of April 2023. This assumes dividends are reinvested. Adjusted for inflation, the 20-year average stock market return (including dividends) is 7.335%.

The index acts as a benchmark of the performance of the U.S. stock market overall, dating back to the 1920s. The index has returned a historic annualized average return of around 11.88% since its 1957 inception through the end of 2021.

Evolution. The index returned an average annual return of 11.66% between July 1991 and April 2023 .

The S&P 500 5 year average return is 13.57%.

Ideally, you should stay invested in equity index funds for the long run, i.e., at least 7 years. That is because investing in any equity instrument for the short-term is fraught with risks. And as we saw, the chances of getting positive returns improve when you give time to your investments.

The term “Lost Decade for Stocks” refers to the ten-year period from 12/31/1999 through 12/31/2009, when the S&P 500^® generated an annualized total return of -0.9% over the period. This was only the second time that the market actually had a negative total return over a decade period.

History shows us that investing in an S&P 500 index fund -- a fund that tracks the S&P 500's performance as closely as possible -- is remarkably safe, regardless of timing. The S&P 500 has never produced a loss over a 20-year holding period.