• Long-term Average Return:
• The S&P 500 index has delivered an average annual return of 10% before inflation.

• After adjusting for inflation, the real return is closer to 7-8%.

• Historical Context:

• Returns over time can vary significantly.
• Since 1926, annual returns have landed in the “average” range (8-12%) only 8 times.

Average S&P 500 Returns by Timeframe

| Period | Average Annual Return |
|---------------------|---------------------------|
| 5 years (2019-2023) | 15.36% |
| 10 years (2014-2023) | 11.02% |
| 20 years (2004-2023) | 9.00% |
| 30 years (1994-2023) | 9.67% |

Note: Returns are influenced by market events like the dot-com bubble, Great Recession, and post-pandemic recovery.

What to Expect from the Market

• Long-term Estimates: Plan for an average annual return of 6% to account for market volatility.
• Bull vs. Bear Markets:
• High past returns often indicate lower future returns.
• Low past returns often signal higher future potential.

Tips for Investors

• Stay the Course:
• Long-term returns depend on a buy-and-hold strategy.

• Avoid frequent trading to minimize fees and taxes.

• Seize Opportunities in Down Markets:

• A bear market allows you to buy stocks “on sale,” potentially leading to higher future gains.

• Rebalance Your Portfolio:

• Periodically adjust to maintain your target investment mix.

• Sell investments that have overperformed and buy those that underperformed.

• Set Realistic Expectations:

• The market doesn’t rise every year. Focus on long-term growth instead of short-term results.

Key Investing Terms

• Return: Profit or loss on an investment relative to its cost.
• Index: A benchmark, like the S&P 500, that tracks the performance of a group of stocks.
• Portfolio: The collection of your investments (e.g., stocks, bonds).

Ready to Invest?

To start earning from the market’s long-term returns:
1. Open a Brokerage Account: Enables you to buy and sell investments.
2. Set a Goal: Decide on a timeline (minimum 5 years for stock investments).
3. Use Tools: Try NerdWallet’s investment calculator to see potential growth.

Remember, patience and consistency are your best allies for growing wealth in the stock market!

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