Why the well-known 10 percent on stocks is a half-truth

When you start investing, you often hear that shares yield an average of ten percent return per year. That sounds attractive to people who want to build wealth or want to retire earlier. But behind that average lies an important warning.

Historical figures show that the stock market is much less predictable than the ten percent suggests. Even investors who leave their money for years may end up making a loss.

The well-known rule of thumb comes mainly from the US stock market. Historical data for the period from January 1871 to September 2026 shows that US equities generated an average return of about 9.4 percent per year.

This concerns the total return, including dividends that are reinvested. Dividend is a part of the profits that companies distribute to shareholders. By reinvesting that money, investors can benefit from the interest-on-interest effect. Their previous returns then also yield returns themselves.

Still, it's important to know that the United States has historically been among the best-performing stock markets in the world. Investors in other countries could not always count on comparable results. The aforementioned ten percent is therefore not a return that can be taken for granted anywhere in the world.

The biggest misunderstanding arises when investors think that their assets are growing by about ten percent each year. In reality, annual returns fluctuate enormously. Historically, results ranged from about 44 percent loss to 57 percent gain.

In more than a quarter of the years examined, US equities ended at a loss. Only eight percent of the years yielded a return between eight and twelve percent. This means that the stock market deviated considerably from the known average in most years.

This can have major consequences for investors who save for a home or their pension. A sharp drop in the stock market just before they need their money can affect years of accumulated profits. The historical average offers no protection against such setbacks.

A long investment horizon usually helps to absorb temporary price fluctuations. Nevertheless, history shows that even periods of ten years sometimes yielded a negative return.

An extreme example is the Great Depression. After the stock market crash of 1929, it took more than fifteen years for the US stock market, measured by the nominal price level, to return to its previous level. Investors who needed their money earlier could not always wait for recovery.

In addition, the historical return is not the same as what investors end up with. Inflation reduces purchasing power, while taxes and investment costs depress the result. Dutch investors in US equities are also exposed to currency risk due to changes in the exchange rate between the euro and the dollar.

The historic ten percent shows what US equities have delivered over a very long period of time. However, the figure does not provide certainty about future returns.