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It's a Bumpy Road to the Stock Market's Long-Term Average Thumbnail

It's a Bumpy Road to the Stock Market's Long-Term Average

What is the Long-Term Average of the Stock Market?

There has never been a simpler, more compelling one-page insight in the true nature of volatility than Dimensional Fund Advisor’s The Bumpy Road to the Market’s Long-Term Average

Volatility properly understood refers to the random distribution of big ups and big downs around a relentlessly upward-sloping long-term trendline. The details as Dimensional Fund Advisors distills them:

Since 1926, the US stock market has rewarded investors with an average annual return of about 10%. But it’s important to remember that returns in any given year may be sky-high, extremely poor, or somewhere in between. 

S&P 500 Annual Returns 1926-2020


  • Annual returns came within two percentage points of the market’s long-term average of 10% in just six of the past 95 years. 
  • Yearly returns have ranged as high as up 54% and as low as down 43%. 
  • Since 1926, annual returns have been positive 70 times and negative 25 times. 

Understanding the range of potential outcomes can help you stick with a plan and ride out the inevitable ups and downs. 

What is the Role of Volatility in the Stock Market?

Volatile markets can be stressful for investors. But volatility also can be viewed in a more positive light. Rapid price changes show that markets are working as they quickly incorporate new information. Once you accept that markets work and prices reflect available information, you can take a long-term view of investing and tuning out the daily noise.

Your financial future is too important to be left to chance. By utilizing an Evidence-Based Investment approach, the team at Cogent Strategic Wealth is about implementing the great ideas in finance for our clients, not speculation. 

Your portfolio is no doubt an important driver of your overall financial plan. In response, we start and end with evidence. Our approach is guided by more than 60 years of objective, peer-reviewed research on how markets work.

The strategies in your investment plan are risk-optimized, cost-effective and tax-efficient to enhance your odds of living the life you've imagined.

Life is uncertain. The market is even more precarious. This means building wealth has no shortcuts. Success requires a solid investment approach, a long-term perspective, and discipline to stay the course. Instead of leaving your financial future to chance, you need to have a plan. 

Cogent Strategic Wealth is here for you. 

So, instead of worrying about your future, why not take positive steps to protect it? Set up a Cogent Conversation with us today. We’ll show you how to transform your hard work into durable wealth even through troubling markets. 

SCHEDULE A FREE CALL TODAY

Past performance is no guarantee of future results. Actual returns may be lower. Investing risks include loss of principal and fluctuating value. There is no guarantee an investment strategy will be successful. Indices are not available for direct investment. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. In US dollars. S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.                                          

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