Investors often anchor on the idea that stocks, or more specifically the S&P 500 index, deliver an average annual return often cited in the 10%-12% range.  While that number is directionally correct over long periods, it creates a misleading expectation about what investing actually feels like year to year. 

Market returns are not consistent year to year. Instead, average returns are realized over time, often shaped by both strong and challenging periods. By preparing for that variability, investors are better positioned to stay focused on long-term outcomes rather than reacting to short-term fluctuations. 

Over the last 50 years, the S&P 500’s calendar-year returns have clustered far from its long-term mean.  

• Rarely Average: Only 4 out of those 50 years did returns land between 10% and 14%—the range most investors would consider “normal.”  
• Usually Outside the Average: 92% of the time returns were meaningfully higher or lower than the average.
• Regularly Higher than Average: In many years, the S&P 500 delivered returns above 20%. 
• Occasionally Negative: Nine of the last 50 years produced negative returns.

These returns were often driven by momentum, improving sentiment, expanding valuations, and investors’ natural tendency to extrapolate recent success far into the future. Markets don’t inch higher in tidy increments; they have historically experienced period of rapid gains as well as sharp declines. 

During periods of negative returns, fear tends to replace optimism, bad news compounds, and investors become overly pessimistic about future growth. Similar patterns have been observed across many equity indices evaluated.

Markets are powered by people, and people are emotional. Prices reflect fundamentals, but they also reflect emotion. When stocks are rising, confidence turns into exuberance, and exuberance turns into excess. Momentum-led rallies can last for years. But when sentiment turns, fear often overshoots reality, pushing prices well below reasonable long-term value. This lopsided pattern is a structural characteristic of markets, not a defect. 

The result is a return stream that is volatile, uneven, and psychologically uncomfortable. Yet it also has historically rewarded long-term investors who can tolerate it. 

The key insight for investors is this: the average return is almost never achieved in short periods. It is earned over time, through patience, discipline, and the willingness to endure uncomfortable stretches without abandoning a sound plan. 

• Investors who expect smooth, average-like returns are far more likely to panic when markets surge or stumble.  
• Investors who understand that volatility is normal (and necessary) are better prepared to stay invested through both extremes. 
• In equity investing, success is less about predicting the next year’s return and more about surviving the ride.  

Being prepared for volatile return streams is what keeps emotions from grabbing the wheel and steering you straight into the financial ditch. 

The market rewards patience, but it charges a toll in volatility. 

Disclosures: This material is provided for informational and educational purposes and does not constitute an offer, recommendation, or investment advice. References to market returns, averages, and volatility reflect historical observations. Past performance does not predict or guarantee future results. All investing involves risk, including the potential loss of principal. The S&P 500 Index is a market capitalization-weighted index of 500 large-capitalization U.S. companies and is unmanaged. Index returns do not reflect fees, expenses, or taxes, and investors cannot invest directly in an index. Aldrich Wealth is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.