S&P 500 Average Returns and Historical Performance

When people talk about “the market,” they’re often referring to the performance of the S&P 500 index. Since 1957, this benchmark index has delivered an average annual return of over 10%—a figure that has created substantial gains for long-term investors. However, that number tells only part of the story.

Behind these average gains lies a history of bull and bear markets, devastating crashes and remarkable recoveries, and major shifts in the kinds of companies found in the index. From the postwar boom of the 1950s to today’s tech-driven market, the index has weathered recessions, inflation spikes, market bubbles, and global crises. While a $100 investment in 1957 would have grown to over $87,000 by 2024, the path wasn’t smooth, and when adjusted for inflation, that same investment would be worth about $7,700 in real purchasing power.

Understanding the S&P 500’s historical performance isn’t just an academic exercise. It provides crucial context for investors deciding how to prepare best for their financial futures through investing. Whether you’re planning for retirement, saving for college, or building long-term wealth, the index’s patterns of returns offer valuable lessons about market behavior, risk management, and the power of compound interest.

What Is the S&P 500 Index?

The S&P 500 is a market capitalization-weighted index of the 500 leading publicly traded companies in the U.S. The index is overseen by Standard & Poor’s Dow Jones Indices, a division of S&P Global Inc. (SPGI). While it took on its present size (and name) in 1957, the S&P dates back to the 1920s, when it was a composite index tracking 90 stocks. The average annualized return from 1928 to November 2024 was 10.06%. Adjusting for inflation, the real average annualized return for the same period is 6.78%.

Below are the returns over different periods backward from the present day (all data for the S&P 500 on this page are from TradingView):

The History of the S&P 500

The history of the S&P 500 tells the story of America’s economic ups and downs:

Postwar boom (1957–1969): After World War II, America had an unprecedented economic expansion. During this period of prosperity, the index climbed steadily, reaching about 800 points, reflecting the nation’s growing industrial might and rising middle class.

Stagflation (1970–1981): The index faced strong headwinds during this time, dropping below 360 points. This decline came as inflation and economic stagnation (nicknamed “stagflation”) worried investors.

Internet Boom and Bust (1990–2002): The rise of the internet drove the index to new heights in the late 1990s, but the dot-com bubble burst led to a sharp decline in the early 2000s.

Financial Crisis (2007–2009): During what became known as the Great Recession, the index had its worst fall, dropping nearly 57% from October 2007 to March 2009.

• The long recovery (2009–2020): After 2009, the market entered its longest bull run in history, rising 330% over 10 years.
• The pandemic and post-pandemic period (2020s): The COVID-19 pandemic briefly interrupted this rise in 2020 with a sharp 15% drop, but the market recovered quickly. By 2021, the index hit several record highs before experiencing significant volatility in 2022. The market showed resilience again in 2023, staging another recovery, rising and hitting then hitting all-time highs in 2024.

How Inflation Affects S&P 500 Returns

The long-term average annual returns from the S&P 500 over the last century, 10.06%, is only part of the story. After adjusting for inflation, the real return drops to about 6.78%. This means that while your money is growing, its purchasing power isn’t increasing as much as the headline number suggests.

Below, we show the difference visually. We use an index value of 100 (not the value of the S&P 500 index, but a hypothetical starting point to depict the change over time) and show how it adjusts, with inflation and without over time:

How Market Timing Affects S&P 500 Returns

When looking at the returns for the S&P 500, it’s important to keep in mind that your returns could be vastly different depending on when you invested. For example, investors who had bought shares in the SPDR S&P 500 ETF Trust (SPY), which tracks the index, in 2014 would be pleased to see the appreciation in value a decade later.

But if the same people had invested during the biggest dips in 2020 or 2022—or worse, exited at either year’s lows—their returns would look far worse.

Instead of trying to time the market, many financial advisors recommend dollar-cost averaging—investing a fixed amount periodically, no matter the market conditions. This strategy helps avoid the risk of investing all your money at market peaks.

Investors who buy during market lows and hold their investment or sell at market highs will experience larger returns than those who buy during market highs, particularly if they sell during dips. Below, we have another chart. This one shows the effect of using dollar-cost averaging for the period starting in 2004. You can see the significant growth, despite the market crises of 2008 and 2020, among other bearish moments in this period.

How the S&P 500’s Components Affect Your Returns

It’s often said that when you invest in the S&P 500, you’re investing in a broad market index and getting the benefits of diversification. While true, the returns of the S&P 500 have become increasingly beholden to a relatively few companies. That means if a few major companies have a rough year or more, it would greatly affect your returns.

As such, this concentration of influence has important implications for investor returns.

Market Cap Concentration

Today’s S&P 500 looks very different from its early days. In 1957, industrial and energy companies dominated the index. By the 1990s, financial and consumer companies were the most prominent. Now, technology firms lead the way.

As of mid-2024, just seven companies known as the “Magnificent Seven”—Alphabet Inc. (GOOGL), Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Meta Platforms Inc. (META), Microsoft Corp. (MSFT), NVIDIA Corp. (NVDA), and Tesla (TSLA)—accounted for about one-third of the entire index’s market value and contributed to nearly half of its returns.

Historical Shifts in S&P 500’s Major Components

The index’s sector makeup has undergone dramatic changes:

• 1957: Industrials represented over 40% of the index
• 1970s: Energy companies briefly dominated during the oil crisis
• 1990s: Financial services grew to over 20%
• 2020s: The technology sector reached historic highs, exceeding 25% of market cap

Performance Impact

This concentration can magnify both gains and losses. Here are some other consequences of this shift:

• In 2023, the top 10 companies contributed about three-quarters of the index’s gains.
• During the 2022 tech sell-off, these same companies accounted for a disproportionate share of losses, which is why the index lost over 18% in value that year.
• The last time the index had a company at over 500 times the value of the 75th-percentile stock was in 2000, just before the dot-com bubble popped.
• The last time the S&P 500’s top stock was so much larger than the 75th-percentile stock was 1932, during the early years of the Great Depression.
• Concentration is up massively, not just by market cap but also by earnings (see the table below).

How to Invest in the S&P 500

You can’t invest in the S&P 500 directly because it is a stock market index, not an individual stock or fund you can buy. You could attempt on your own to buy one of every stock listed on the S&P 500, but you’ll need quite a bit of capital to do so—it might cost around $3,000 to buy just one share from each of the top 10 stocks in the index (if you don’t opt for fractional shares).

For most people, the simplest and most affordable option for investing in the S&P 500 is to buy shares in an exchange-traded fund (ETF) or mutual fund that tracks it. Here’s some current information on popular S&P 500 index funds:

The Bottom Line

The S&P 500’s history tells a compelling story of American economic growth, though not without its dramatic ups and downs. While its long-term average return of 10.13% (6.37% after inflation) has created substantial wealth for long-term investors, today’s market is shifting. The unprecedented concentration in top technology companies—accounting for 33% of the index’s value—marks a historic transformation from its more diversified past. However, unlike previous periods of high concentration, today’s market leaders, for now, have more robust fundamentals and more reasonable valuations than their predecessors.

While the index has proved resilient over long periods—it remains the premier benchmark with which to compare other investments—success requires patience through market cycles and discipline when there’s volatility. In fact, a steady, long-term approach has historically been more effective than attempting to time the market.