Why a 10% Average Return Tells You Almost Nothing About Any Single Year
If someone told you that the U.S. stock market has finished a given calendar year higher than it started roughly seventy-three times out of the last ninety-nine, you might reasonably conclude that stocks are a fairly comfortable bet. If someone then told you the long-run average annual return over roughly a century is about 10%, you might imagine a market that quietly compounds wealth every year, like a savings account with slightly better manners. Neither impression survives contact with the actual year-by-year record.