US Stock Market Real Returns
Historical data on real stock market returns adjusted for inflation
Understanding Real Returns
Real returns are what you actually earn after accounting for inflation. This is crucial for understanding the true opportunity cost of gambling vs. investing.
Key Concepts:
- Nominal Returns: The raw percentage gain/loss on your investment
- Inflation: The rate at which prices increase over time
- Real Returns: Nominal returns minus inflation = your actual purchasing power gain
Historical S&P 500 Real Returns
The S&P 500 has averaged approximately 7% real returns annually over the long term, but this varies significantly by decade:
Decade-by-Decade Performance:
- 1950s: 19.4% real returns (post-war boom)
- 1960s: 7.8% real returns
- 1970s: 1.6% real returns (high inflation period)
- 1980s: 12.5% real returns (recovery)
- 1990s: 15.3% real returns (tech boom)
- 2000s: -1.4% real returns (dot-com bust + financial crisis)
- 2010s: 13.6% real returns (bull market)
- 2020s (so far): ~8% real returns
Why This Matters for Gambling
When you gamble, you're not just losing the money you bet - you're also losing the potential returns that money could have earned if invested instead.
Example: $1,000 Lost to Gambling
If you lose $1,000 gambling today, you're not just losing $1,000. You're losing:
- $1,000 today
- $1,070 in 1 year (7% real return)
- $1,145 in 2 years
- $1,225 in 3 years
- $1,311 in 4 years
- $1,403 in 5 years
- And so on...
After 20 years, that $1,000 could have grown to $3,870 in today's dollars!
Compound Growth Calculator
Use this to understand the true cost of gambling losses over time:
Lost Opportunity Calculator
Formula: Future Value = Present Value × (1 + Real Return Rate)^Years
Example: $100 lost today at 7% real returns:
- 5 years: $140
- 10 years: $197
- 15 years: $276
- 20 years: $387
- 25 years: $543
- 30 years: $761
Risk vs. Reward
Stock market investing has risks, but they're fundamentally different from gambling risks:
Stock Market vs. Gambling
| Aspect | Stock Market | Gambling |
|---|---|---|
| Expected Return | +7% annually (real) | -1% to -15% (house edge) |
| Risk Type | Market volatility | Guaranteed loss over time |
| Time Horizon | Long-term positive | Always negative |
| Control | Diversification, strategy | No strategy overcomes house edge |
Sources & Methodology
This data is based on:
- S&P 500 total returns (including dividends)
- Consumer Price Index (CPI) for inflation adjustment
- Historical data from 1950-2023
- Real returns calculated as: (1 + Nominal Return) / (1 + Inflation Rate) - 1
Note: Past performance doesn't guarantee future results, but historical data shows that over long periods, the stock market has consistently provided positive real returns.