What Is the Average Index Fund Return?

Here's why investing in an S&P 500 index fund could pay off nicely over the long term.

Key Points

Investing in the S&P 500 index offers exposure to 500 of the largest U.S. companies, simplifying diversified investing.
Historically, the S&P 500 has returned an average of over 10% annually, showcasing long-term gains.
S&P 500 funds, available as ETFs or mutual funds, provide a practical option for investing in the S&P 500.

How would you like to own shares of 500 of the biggest companies traded on U.S. stock exchanges in one fell swoop? That's what you get when you invest in the S&P 500 index, which tracks the performance of 500 of the largest stocks weighted by market cap that trade on the Nasdaq and the New York Stock Exchange (NYSE). And you can profit handsomely from such an investment; the average annual return for the S&P 500 is close to 10% over the long term.

The performance of the S&P 500 index is better in some years than it is in others, though. Here's how the S&P 500 index has performed in recent decades -- and why it's an attractive option for many investors.

Loading paragraph...

Data source: Slickcharts.com.

Loading table...

Loading paragraph...

Loading image...

If you had invested $10,000 in the S&P 500 index in 1995, you'd now have more than $190,000. Market volatility in a given year could cause this return to decline somewhat. However, the index has proven to be a winner over the long term.

Loading paragraph...

Loading image...

Loading paragraph...

Data source: Yahoo! Finance.

Loading table...

The main difference between buying S&P 500 ETFs vs. mutual funds is that ETFs trade like a stock. You can buy or sell an ETF instantly through a brokerage at the then-current price. Mutual funds are priced daily, and your purchase or sale isn't instantaneous.

Loading paragraph...

Buying a mutual fund or an ETF that tracks the S&P 500 is simple; it doesn't require the research that investing in stocks with solid growth prospects demands. Investing in an S&P 500 fund (either a low-cost mutual fund or an ETF) guarantees that you'll do as well as the stock market over time. And, over the long term, that performance has been quite good.

Loading paragraph...

Related index fund topics

Loading paragraph...

3 Best S&P 500 Index Funds to Buy in 2026

Multiple index funds track the S&P 500. Which ones are the best investments for you?

Best S&P 500 ETFs to Buy in 2026

A fund that invests in the companies in the S&P 500 can be a great way to start a portfolio and invest for the long term.

8 Best Index Funds to Buy in March 2026

Looking to the long term? Get in on these index funds.

How to Invest in Index Funds: A Beginner's Guide

Index funds track a particular index and can be a good way to invest. Get a fast introduction to index funds here.

Loading hub_pages...

About the Author

Keith Speights is a contributing Motley Fool healthcare analyst covering publicly traded companies across pharmaceuticals, biotechnology, medical devices, technology, and marijuana. Prior to The Motley Fool, Keith was CEO of Constant Care Technology, a healthcare technology company; vice president of American HealthTech, a healthcare software company; and a director of operations for Blue Cross Blue Shield of Mississippi, a health insurer. He holds a B.S. in Industrial Engineering from Mississippi State University.

TMFFishBiz

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.