What is the Average Stock Market Return and How to Beat It!

TL;DR

Understand the average stock market returns and the factors that can affect them to set realistic expectations for your investments.

Transcript

After a decade-long bull market, what can you really expect from the market? What’s the average stock market return? In this video, I’ll show you the history of bull and bear markets to find that reasonable return. We’ll look at what’s caused stock market crashes in the past and more importantly, what investment returns you can expect from the futu... Read More

Key Insights

• 🙈 The current ten-year bull market is atypical, exceeding the average length, but it is not experiencing the euphoria typically seen before a crash.
• 🫢 Factors such as recessions, extreme stock valuations, Federal Reserve actions, and unexpected shocks can cause stock market crashes.
• 😘 The average returns for different investments over the next decade are projected to be lower than in the previous decade.

Questions & Answers

Q: What is the average length and growth of bull markets?

On average, bull markets last around 54 months and result in a 129% increase in stock prices from the previous bear market low.

Q: How often do bear markets occur, and what is the average decline in stock prices during these periods?

Bear markets occur, on average, every 9 months and cause an average decline of 28% in stock prices.

Q: What are the common causes of stock market crashes?

Stock market crashes are often caused by recessions, negative economic growth outlooks, extreme stock valuations, actions of the Federal Reserve, and unexpected external shocks.

Q: What is the expected average return for different investments over the next decade?

US government bonds are expected to yield a 1.7% return, US credit bonds a 2.3% return, US equities a 6% return, small-cap stocks a 6.3% return, and US commercial property a 5.3% return over the next decade, according to Blackrock's research.

Summary & Key Takeaways

• Over the past ten years, the stock market has experienced significant growth, leading to high expectations for returns. However, it is important to have a realistic understanding of average stock market returns.

• Bull markets typically last around 54 months, with an average increase in stock prices by 129% from the previous bear market low.

• Bear markets, characterized by a 20% or more drop in stock prices, occur around every 9 months on average and cause an average decline of 28% in stock prices.