What Investing Actually Returned

The average hides the thing you need to know

A single average return is the least useful honest number in investing. What decides your outcome is when you happened to start — and over any period shorter than a working lifetime, that swings the answer enormously.

Here is every rolling window in the record, inflation-adjusted, with dividends reinvested. Not a simulation: every one of these is a period someone actually lived through.

Time is what turns a gamble into an investment

Over one year the market has ranged from -58.1% to +151.3%. That is not investing, it is weather.

Over ten years it has still lost money in real terms — the worst stretch began in 1999-03 and shed 5.9% a year, and only 89% of ten-year windows finished positive. Anyone who tells you a decade is a safe horizon has not checked.

Over thirty years, every single window in the record was positive, and the worst of them still returned 1.9% a year after inflation. The spread narrows from terrifying to merely wide. That convergence — not any particular average — is the actual argument for long-horizon investing.

Where our 7% assumption comes from

The compound interest calculator and the 401(k) calculator both default to a 7% return. This page is the justification: the median 30-year real return in the entire record is 6.8%.

It is a middle estimate, not a promise — the same record contains 30-year stretches at 1.9% and 11.2%. When a projection tool shows you one smooth line, this is the distribution that line is drawn from.

What this does not include

Index total return, before fees and taxes. A low-cost index fund costs a few basis points; an actively managed fund can take a percentage point or more, which compounds against you exactly as returns compound for you. Taxes depend on the account and your bracket — see the capital gains calculator.

It is also one market, one asset: US large-cap stocks. No bonds, no international diversification, no rebalancing. And the deepest caveat of all — this is the record of the most successful stock market of the last century, which is exactly the kind of sample that flatters. Past performance genuinely is not a guide to future results.

Common questions

Six starting points worth looking at

The calculator above takes any start month. These six have their own pages because each one says something the others do not:

• If you invested in 1929 — The worst possible moment to begin, and the one every argument about market risk eventually reaches for. What happened next is grimmer than the averages suggest and less grim than the folklore.
• If you invested in 1950 — A start that ran through six separate falls of more than a fifth and still finished in the top third. The case that surviving crashes matters more than avoiding them.
• If you invested in 1980 — One of the best long runs available in the whole record. Worth seeing next to 2000 — two decades apart, opposite ends of the table.
• If you invested in 2000 — The single worst year to have started in the entire record, out of every year measured. If you want to know what bad timing actually costs, this is the page.
• If you invested in 2008 — Everyone assumes this was a terrible time to begin. It was not, and the ranking is the surprise — buying into a crash and buying at a peak are very different things.
• If you invested in 2010 — The easy decade: one drawdown, a fast recovery, and returns most starting points never saw. Useful mainly as the counterweight to 2000.