What is the average return on an ETF?
Generally speaking, ETFs that track broad market indices, such as the S&P 500, can provide moderate to low returns with relatively low risk. For example, the S&P 500 has an average historical return of around 10% per year.
What is the Average ETF Return? The average ETF return will vary depending on each fund's strategy and goals. However, broad market ETFs generate an average return between 7-10%. You can invest in ETFs that track specific types of stocks, such as high dividend-paying companies.
| Period | Average annualised return | Total return |
|---|---|---|
| Last year | 30.7% | 30.7% |
| Last 5 years | 15.9% | 109.5% |
| Last 10 years | 15.7% | 331.4% |
| Last 20 years | 10.8% | 682.2% |
The average stock market return is about 10% per year, as measured by the S&P 500 index, but that 10% average rate is reduced by inflation. Investors can expect to lose purchasing power of 2% to 3% every year due to inflation. » Learn more about purchasing power with NerdWallet's inflation calculator.
According to our calculations, a $1000 investment made in February 2014 would be worth $5,971.20, or a gain of 497.12%, as of February 5, 2024, and this return excludes dividends but includes price increases. Compare this to the S&P 500's rally of 178.17% and gold's return of 55.50% over the same time frame.
Q: How does the wash sale rule work? If you sell a security at a loss and buy the same or a substantially identical security within 30 calendar days before or after the sale, you won't be able to take a loss for that security on your current-year tax return.
Cost efficiency: Most ETFs generally boast lower expense ratios compared to actively managed mutual funds since they passively track an index instead of maintaining a team of analysts for selecting individual stocks. This results in enhanced long-term returns for investors.
In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500, then you would be sitting on a cool $1.2 million today.
- High-yield savings accounts.
- Money market funds.
- Short-term certificates of deposit.
- Series I savings bonds.
- Treasury bills, notes, bonds and TIPS.
- Corporate bonds.
- Dividend-paying stocks.
- Preferred stocks.
| Symbol | Name | 5-Year Return |
|---|---|---|
| FNGO | MicroSectors FANG+ Index 2X Leveraged ETNs | 45.21% |
| TECL | Direxion Daily Technology Bull 3X Shares | 36.48% |
| SMH | VanEck Semiconductor ETF | 32.29% |
| ROM | ProShares Ultra Technology | 30.58% |
Is a 7% return realistic?
While quite a few personal finance pundits have suggested that a stock investor can expect a 12% annual return, when you incorporate the impact of volatility and inflation, 7% is a more accurate historical estimate for an aggressive investor (someone primarily invested in stocks), and 5% would be more appropriate for ...
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
$100 a month invested from age 25 to 65 is $1,176,000. You do NOT have to retire broke.
| Discount Rate | Present Value | Future Value |
|---|---|---|
| 6% | $1,000 | $3,207.14 |
| 7% | $1,000 | $3,869.68 |
| 8% | $1,000 | $4,660.96 |
| 9% | $1,000 | $5,604.41 |
A $10,000 investment in Tesla back in April of 2014 would now be worth roughly $121,460 right now -- and that's even factoring in the stock's pullback this year.
If you had invested in Netflix ten years ago, you're probably feeling pretty good about your investment today. According to our calculations, a $1000 investment made in February 2014 would be worth $9,138.15, or a gain of 813.81%, as of February 12, 2024, and this return excludes dividends but includes price increases.
Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.
Visit your My NerdWallet Settings page to see all the writers you're following. RDIV and SPYD have some of the highest yields of any high-dividend ETF. It's possible to live off the income from high-dividend ETFs, but it may take some planning.
Nearly all leveraged ETFs come with a prominent warning in their prospectus: they are not designed for long-term holding. The combination of leverage, market volatility, and an unfavorable sequence of returns can lead to disastrous outcomes.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.
Do ETFs do well in a recession?
Investors looking to weather a recession can use exchange-traded funds (ETFs) as one way to reduce risk through diversification. ETFs that specialize in consumer staples and non-cyclicals outperformed the broader market during the Great Recession and are likely to persevere in future downturns.
For instance, some ETFs may come with fees, others might stray from the value of the underlying asset, ETFs are not always optimized for taxes, and of course — like any investment — ETFs also come with risk.
As you will see, the future value of $40,000 over 20 years can range from $59,437.90 to $7,601,985.51.
The result is the number of years, approximately, it'll take for your money to double. For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.
As impressive as that is, original investors in Amazon fare even better. If you had invested $1,000 during Amazon's IPO in May 1997, your investment would be worth $1,341,000 as of August 31, according to CNBC calculations. That's better than the so-called FAANG stocks, plus Ebay – which debuted in that same period.
