How much does the stock market return?

This question is tricky, but let us define a "return." What is it?

The money you make or lose on investment over time is called a return or a financial return. It can be expressed nominally as the change in the dollar value of an asset over time. And it can also be described as a percentage derived from the profit-to-investment ratio. Financial returns can often be as net results like the after fees of taxes and inflation or the gross returns that do not account for the price change. It even includes a 401(k) investment.

The precise return definition is situational and depends on the financial data input. Most investors are aware of this.

An investor owns the holding period return. The holding period return can be expressed as nominal or as a percentage. The term often used is the rate of return (RoR), expressed as a percentage.

What is the difference between a nominal and a real return?

The real rate of return is the annual rate taken into consideration after taxes and inflation. A nominal rate is a return that does not consist of taxes or inflation. Likewise, a rate of return that includes taxes or inflation in its calculation is the real rate.

The nominal rate is the amount of money generated by an investment before it is factored by the expenses such as taxes, investment fees, and inflation. If an investment generated a 10% return, the nominal rate would equal 10%.

Therefore, the average stock market return has been roughly 10% per year for nearly the last century. It is measured using the annual S&P 500; the yearly stock market returns benchmark. Though 10% is the average stock market return, returns in any year are far from average.

Is it worth keeping the money in the stock market?

It's an honest question whether it's worth keeping your money in the stock market whenever there is a period of extreme market volatility, especially in the first half of 2022. The stocks entered a bear market after the Federal Reserve began tightening monetary policy.

They can only be compared when converted to same-length breaks over periodic intervals of different lengths. To compare returns earned during year-long intervals is usually reached. The process of converting shorter or longer return intervals to annual returns is called annualization.

The stock market produces volatile returns and has evidence of outpacing inflation in the long run. Suppose the money you have invested in the stock market will be intended for something other than another investment in the next few years. In that case, keeping your money invested in the stock markets is even better than taking it out.