Historical Stock Market Returns

Historical stock market returns are a great source of information on how you can make money in today's stock market. The best way to make money in the stock market is over time. A rich family friend of mine who made millions in real estate property over the years said, "Real estate is like the stock market. If you get in and get out, you stand to lose a lot of money, but if you are in it for the long term and can only make money." No in history has been able to consistently time the market to maximize profits. Historical stock market returns show that on average one can expect to make about an 6-8% return (depending on how conservative you want to be) every year over the life of your portfolio if you keep buying stocks for a ten year period. This mean if you buy stock and hold on to it for 10 years (long term investment), you will likely make 6-8% on your money every year.

Now it should be noted that historical stock market returns have shows that about once every four year the market goes through a period called a bear market. This is when stock prices plummet and a lot of people panic with their stocks. This is a period when people tend to lose money because they sell their stocks to try and preserve the money in their accounts.

The issue with this is that 3 out of 4 years tend to be bull markets - when you make the most money off the stock market. If you continue to invest during a bear market at low prices, by the time the bull market come around you will see your pporfolio soar in value. Here's an example to show you how the S&P 500 has acted since 1950-2009.

Relative price and total return of the S&P 500 index

As you can see, the historical stock market data shows that every 3 or 4 years that the S&P 500 had a dip in value due to a bear market. But if you notice, the S&P 500 kept rising after during the bull markets. Over a 10-20 year period, you stand to only make money buy investing in today's stock market.

Based on the historical data, you have no reason to be scared of investing your money in the stock market.