The bumpy road to the market's long-term average

S.F. Ehrlich Associates |

May 15, 2022

The chart below from Dimensional Funds1 depicts in graphic form how much the S&P 500 Index has gained (or lost) in every year since 1926. While the average annual return is approximately 10%, “it’s important to remember that returns in any given year may be sky-high, extremely poor, or somewhere in between.”


In fact, while the long-term average return may be approximately 10%, note that “Annual returns came within two percentage points of the market’s long-term average…in just seven of the past 96 years.” In other words, there’s a lot more volatility than the ‘smooth’ annual returns one might envision. (When viewing the chart, the horizontal gray bar shows the market average plus or minus two percentage points. Notice the mere seven times the Index actually falls within that range.)

In terms of volatility, “Yearly returns have ranged as high as up 54% and as low as down 43%.” (NOTE: This chart shows returns for calendar years only. Returns over other 12-consecutive month periods may be higher or lower.)

Finally, “Since 1926, annual returns have been positive 71 times and negative 25 times.”




1 “The Bumpy Road to the Market’s Long-Term Average.” Dimensional Fund Advisors, February 2022.
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