Here's the Average Stock Market Return Over the Last 10 Years, and What It Means for the Next 10 Years

Collectively, more than 5,700 companies were listed on the New York Stock Exchange and Nasdaq Exchange as of December 2023. Many of those companies are components of the major indexes that measure various aspects of the U.S. stock market.

The most popular indexes for investors to follow are the S&P 500 (SNPINDEX: ^GSPC), the Dow Jones Industrial Average (DJINDICES: ^DJI), and the Nasdaq Composite (NASDAQINDEX: ^IXIC). Here's how each performed over the last 10 years.

S&P 500: A 190% gain over the last decade (11.2% annually)

The S&P 500 measures the performance of 500 of the largest U.S. companies -- a group that accounts for 80% of the value of the domestic equities market. The index was created in 1957, though its precursor was introduced in the 1920s. Initial inclusion is limited to companies that meet specific eligibility requirements, including GAAP profitability and a minimum market value of $18 billion.

The S&P 500 is generally considered the best gauge for the overall U.S. stock market due to its scope and diversity. The five largest components in the index by weight are:

1. Apple: 6.9%
2. Nvidia: 6.6%
3. Microsoft: 6.3%
4. Amazon: 4.3%
5. Alphabet: 4.1%

The S&P 500's value advanced 190% over the last decade, compounding at 11.2% annually. Those figures do not include dividends. Investors can get exposure to the broad-based S&P 500 by purchasing shares of an index fund like the Vanguard S&P 500 ETF (NYSEMKT: VOO).

Dow Jones Industrial Average: A 150% gain over the last decade (9.6% annually)

The Dow Jones Industrial Average tracks the performance of 30 large U.S.-based companies. The index was created in 1928, though its precursor was introduced in the 1890s. Inclusion is generally limited to stocks in the S&P 500, and the selection committee typically chooses companies that have excellent reputations, have demonstrated sustained growth, and are of widespread interest to investors.

The Dow Jones is considered a blue chip index due to its focus on companies with strong reputations and sustained growth. Unusually, it is weighted by share price, not market cap. The five top components in the index by weight are:

1. UnitedHealth Group: 8.3%
2. Goldman Sachs: 8.2%
3. Microsoft: 5.8%
4. Home Depot: 5.8%
5. Caterpillar: 5.5%

The Dow Jones Industrial Average advanced by 150% over the last decade, compounding at 9.6% annually. Those figures do not account for dividend payments. Investors can get exposure to it by purchasing shares of index funds such as the SPDR Dow Jones Industrial Average ETF (NYSEMKT: DIA).

Nasdaq Composite: A 300% gain over the last decade (14.8% annually)

The Nasdaq Composite tracks the performance of more than 3,200 companies, the vast majority of which are based in the U.S., though it does include a few international equities. The index was introduced in 1971, and inclusion is limited to stocks that trade exclusively on the Nasdaq Stock Exchange (with a few exceptions that have been grandfathered in).

The Nasdaq Composite is heavily weighted toward the information technology sector, so the index is generally regarded as a barometer for growth stocks. The five largest components in the index by weight are:

1. Apple: 11.7%
2. Nvidia: 11.1%
3. Microsoft: 10.3%
4. Amazon: 7.2%
5. Alphabet: 6.8

The Nasdaq Composite advanced by 300% over the last decade, compounding at 14.8% annually. That does not include reinvested dividends. Investors can get exposure to the index through funds such as the Fidelity Nasdaq Composite ETF (NASDAQ: ONEQ).

What investors can learn from historical stock market returns

Most investors will have seen the common disclaimer: "Past performance is never a guarantee of future results." Every situation is unique and there are exceptions to every rule. However, while history may not repeat itself, it often rhymes.

The returns discussed for each index are probably a reasonable guide for how they will perform over the next decade, though investors should lower their expectations slightly given that valuations are elevated right now. The S&P 500 certainly won't return 11.2% every year for the next decade, but compound annualized returns in the 8% to 11% range seem like a reasonable forecast.

Here's the bottom line: The U.S. stock market has consistently created wealth over long time periods, and investors have no reason to believe that will change. There will be good years and bad years, but history says all three major indexes will be worth far more a decade from now. That means there are plenty of stocks worth buying today.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Goldman Sachs Group, Home Depot, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends UnitedHealth Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.