The U.S. stock market has averaged about 10% a year (nominal) since 1926, or roughly 7% after inflation. That's the headline number behind most long-term investing projections — and the reason Caspenda uses 7% as its default "balanced" return assumption.
The 10% figure tracks the S&P 500, the most widely used measure of the large-cap U.S. stock market. It includes dividends and is compiled from long-run historical data by NYU Stern's Aswath Damodaran (Source: NYU Stern historical returns).
But the average is only half the story. No single year is average. The market regularly swings from −30% to +30% in a single year. The "average" is what you get from holding through all of it for decades.
Nominal vs. real return: which one matters?
Two numbers get mixed up constantly:
- Nominal return (~10%) — the raw growth of your portfolio in dollar terms. This is what your brokerage statement shows.
- Real return (~7%) — nominal return minus inflation. This is what your money can actually buy.
Planning with the nominal number overstates your future purchasing power. For most long-term planning, use the real return — or use the nominal return and separately adjust for inflation. See how inflation erodes money with our Inflation calculator.
What $10,000 grows to, at the average
Here's a single $10,000 investment under both assumptions, no monthly contributions:
| Years | At 10% (nominal) | At 7% (real, today's buying power) |
|---|---|---|
| 5 | $16,105 | $14,025 |
| 10 | $25,937 | $19,672 |
| 20 | $67,275 | $38,697 |
| 30 | $174,494 | $76,123 |
Model any amount with our Compound Interest calculator.
Why 7% is the right default — and when it isn't
Caspenda defaults to 7% for a reason: it's a common, defensible long-term assumption for a diversified stock portfolio after inflation. But the "right" number depends on what you're holding:
- 100% stocks — historically ~7% real, but with big swings
- Balanced stock/bond mix — more like 5–6% real, with less volatility
- Savings accounts / bonds — much lower, often below inflation
Use 7% only as a starting point. Test your plan with 5% (conservative) and 9% (optimistic) to see how sensitive your goal is to the assumption. Our Portfolio Growth calculator breaks down contributions vs. growth vs. fees under any rate.
Volatility is the part people forget
The average return is not a smooth path. Since 1926 the S&P 500 has had decades that were far above and far below average — including a lost decade from 2000–2009. The average only works if you stay invested through the bad years. Timing the market usually does worse than simply holding; see the math in DCA vs Lump Sum.
Frequently asked questions
Is a 7% return realistic?
As a long-run, inflation-adjusted assumption for a diversified stock portfolio, yes — it's close to what U.S. stocks have actually delivered since 1926. It is not a guarantee for any single decade.
Does the average include dividends?
Yes. The ~10% figure counts total return, which includes dividends plus price appreciation. Looking at price change alone (without dividends) understates long-term returns.
How should I use the average in planning?
Use it as a planning range, not a promise. Model your goal at 5%, 7% and 9%, and check that you'd still be okay in the lower case. Our Savings Goal calculator works backwards from any rate.
Is the stock market a good place for short-term money?
No. Over short periods (under 5 years) the market can lose money, and the "average" doesn't apply. Short-term money belongs in savings — for long-term goals, stocks have historically paid the compounding premium.