What's the average return for the S&P 500?
Over the past 10 years, the S&P 500 has posted annualized returns of 11.18%. In 2020, it posted a return of 15.15%.
Since the companies within the index are so diverse, and are collectively worth about 80% of all US stocks' total value, these performance figures are widely seen as synonymous with the performance of the US stock market overall.
Limitations of the S&P 500
Though seen as widely representative, the S&P 500 isn't perfect.
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The S&P 500 is a weighted index, meaning companies with a higher market cap carry more clout in the calculations. As a result, the index may give "disproportionate weighting to the largest companies," cautions Leyla Z. Morgillo, a certified financial planner with Madison Financial Planning Group. "Those weightings can then skew the performance of the index, resulting in a handful of stocks driving the overall index performance. You wouldn't be able to tell that just by looking at the overall performance of the S&P 500, which is why it can be misleading at times."