What is the average rate of return on the stock market?

Question

What kind of interest rate does the stock market offer long-term (30 years)?

Answer 1

It depends on what you mean by "the stock market"

Long term, the S&P 500 (which is essentially an average of the large cap companies in the US stock market) has given about 10% return historically.  Economists do not expect that that level of return will continue and something like 6% is more realistic looking forward.  It's not great, but it's decent.

The Russell indices, which are composed of small cap stocks, tend to perform better long term (15-20%) but have a lot more volatility.  And emerging markets indices can go even higher than that, both in return and volatility.

There are mutual funds you can get, which offer differing historical returns.  Generally there are low-risk funds that will give you a slow, steady return at a low rate, and high-risk funds that will give you a high rate in the long run but be all over the map day-to-day.

Answer 2

no one knows for sure (and i mean absolutely no one) what kind of return the stock market will offer in the next 30 years.

historically, if you minus inflation, the market has offered around 10% per year. but some 30year periods have been way up on this, others way down.

remember, the current value of the market is peoples best guess of what it is worth based on the concept of Net Present Value. the NPV formula uses a discount rate, and i would say the discount rate investors would be using to calculate the value of stocks these days would be roughly around 8%. everything else being equal, you could say that investors are expecting around an 8% future return from the stock market.

Answer 3

It depends on which 30 years you choose to look at.  And it also depends on the inflation rate during those 30 years.

On paper you may have profits.  But in real terms you may have losses because of the inflation.