What is the S&P 500 Average Annual Return?

The S&P 500 originally started in 1926 as a “composite index” of only 90 stocks.

According to historical records, the average annual return since inception from 1926 to 2019 is 9.8% (including dividends).

S&P 500 Historical Returns

Source: Macrotrends.net

How Market Timings Affect Average Annual Returns

One major factor for annual returns for an investor in the S&P 500 is when they choose to invest. For example, the SPDR S&P 500 ETF Trust (SPY), has returned 8.8% annually since inception in 1993. However, emotions come into play and sometimes investors choose to buy when prices and high and sell out of fear when prices get lower.

Investors who buy during market lows and hold over time will outperform investors who try to “time the market”. If you can sell at the market top then do it if it works for you. However, most investors will benefit from dollar cost averaging and holding over time to allow compound interest to work its magic.

The History of the S&P 500 Index

The Standard & Poors 500 is a collection of 500 stocks that measures the performance on the US stock market as a whole. Only 500 of America’s largest companies comprise the list and it’s used widely as an overall benchmark of the stock market. The S&P 500 is a market capitalization weight index meaning the top 10 stocks make up around 21% of the entire index.


The components of the index are selected by a committee and each company must adhere to the following criteria:

  • Market cap equal to or greater than $8.2 billion
  • Annuall dollar value traded to float adjusted market cap is greater than 1
  • Minimum monthly trading volume of 250,000 shares in each of the 6 months leading up to evaluation date

Historical S&P 500 Returns

Best S&P 500 ETFs

Investors can choose from several ETFs that mimic the S&P 500 instead of having to buy 500 stocks individually. Here are some of the best S&P 500 ETFs:

  • SPDR S&P 500 ETF (SPY)
  • Vanguard S&P 500 ETF (VOO)

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