The U.S. stock market has averaged about 10% a year (nominal) since 1926, or roughly 7% after inflation. That's the historical context. Note the distinction: the 7%-after-inflation figure is a real-terms historical result, while Caspenda's calculators use 7% as an illustrative nominal annual return (not a forecast) — so don't mix the two, and if you enable the inflation adjustment it is deducted from that nominal rate.
The historical figures here come from long-run U.S. market data compiled by NYU Stern's Aswath Damodaran (Source: NYU Stern historical returns). For planning context, Investor.gov emphasizes that investments do not have a set return and notes that some experts use 7–10% as a long-term estimate for diversified U.S. stocks based on historical averages.
But an average does not describe any particular year. Annual market returns vary widely, and losses are possible. Investor.gov explicitly notes that all investments involve risk and that market values fluctuate over time. Historical averages are context, not a promised yearly outcome.
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 |
The table compounds effective annual rates annually; the calculator defaults to a nominal rate compounded monthly. Select annual compounding to reproduce this table, and leave inflation adjustment off for a real-rate scenario. Model any amount with our Compound Interest calculator.
Using a nominal scenario in the calculators
Caspenda's default 7% is an illustrative nominal annual return before inflation, fees and taxes. It is not the historical 7% real-return figure. A diversified portfolio can produce very different outcomes depending on its assets, valuation, costs and the period measured.
Test several nominal scenarios, such as 5%, 7% and 9%, without treating any as a forecast. Enable the inflation adjustment once to express a nominal projection in today's purchasing power. If you instead enter a real return, leave that adjustment off and keep every contribution and target in consistent real dollars.
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?
It depends on whether the figure is nominal or real and on the assets and period. The calculators use 7% only as a nominal scenario; historical real returns do not establish a future planning rate.
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 nominal rates of 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.