S&P 500 historical returns show resilience through recessions
The S&P 500 has delivered an average annual return of 9.98% since 1928, a period that includes the world's worst recessions, crashes, and conflicts. This long-term track record illustrates the index's resilience despite significant economic downturns. While no one knows when the next recession will begin, history suggests these periods present opportunities for investors to buy stocks at lower prices. For example, if the S&P 500 declines by 18%, similar to the 2022 bear market where it lost about 19% of its value, every $1,000 invested buys a larger percentage of shares than at peak prices. Individual stocks also see price reductions during recessions, allowing the same capital to purchase more shares. The Vanguard S&P 500 ETF, known as VOO, has provided context for recent market performance. Since its inception in September 2010, VOO has gained a cumulative return of about 835.6% by net asset value. An investment of $10,000 at that time would have grown to approximately $69,250. Over the past ten years, VOO has delivered average annual returns of about 15.3%. The past 10 to 15 years have been relatively smooth for stock market investors, with the last serious recession occurring during the global financial crisis of 2008. The COVID-19 pandemic caused a short, deep economic downturn and a brief stock market sell-off. Although some investors may feel nervous about the inevitability of an economic downturn, preparing by checking emergency cash savings and assessing job security is advised. Investors might build up extra cash to invest during a recession or improve their earning power through new skills. For those whose portfolios feel too risky, diversifying or rebalancing before a recession hits is recommended, potentially by adding bond ETFs or other assets. While not every company survives a recession and some sectors may face major shakeouts and bankruptcies, the broad stock market has historically trended upward in the long run. At the stated 9.98% average annual return rate, every dollar invested doubles in about 7.2 years. After 22 years, a $10,000 investment would be worth more than $80,000 due to compound interest.
The S&P 500 has delivered an average annual return of 9.98% since 1928, a period that includes the world's worst recessions, crashes, and conflicts. This long-term track record illustrates the index's resilience despite significant economic downturns. While no one knows when the next recession will begin, history suggests these periods present opportunities for investors to buy stocks at lower prices. For example, if the S&P 500 declines by 18%, similar to the 2022 bear market where it lost about 19% of its value, every $1,000 invested buys a larger percentage of shares than at peak prices. Individual stocks also see price reductions during recessions, allowing the same capital to purchase more shares. The Vanguard S&P 500 ETF, known as VOO, has provided context for recent market performance. Since its inception in September 2010, VOO has gained a cumulative return of about 835.6% by net asset value. An investment of $10,000 at that time would have grown to approximately $69,250. Over the past ten years, VOO has delivered average annual returns of about 15.3%. The past 10 to 15 years have been relatively smooth for stock market investors, with the last serious recession occurring during the global financial crisis of 2008. The COVID-19 pandemic caused a short, deep economic downturn and a brief stock market sell-off. Although some investors may feel nervous about the inevitability of an economic downturn, preparing by checking emergency cash savings and assessing job security is advised. Investors might build up extra cash to invest during a recession or improve their earning power through new skills. For those whose portfolios feel too risky, diversifying or rebalancing before a recession hits is recommended, potentially by adding bond ETFs or other assets. While not every company survives a recession and some sectors may face major shakeouts and bankruptcies, the broad stock market has historically trended upward in the long run. At the stated 9.98% average annual return rate, every dollar invested doubles in about 7.2 years. After 22 years, a $10,000 investment would be worth more than $80,000 due to compound interest.