What does "average return" mean?
A return is what you get back in relation to what you put in.[S2] With stocks, it can come from a rising share price and from dividends.[S1]
A dividend is a portion of a company's profit paid to shareholders.[S3]
This question is usually about a stock index: a chosen group of stocks measured as one number.
One such index is the S&P 500, published by S&P Dow Jones Indices. It follows large US companies, the part of the market its publisher calls large-cap.[S8]
Its methodology sets the index at 500 companies. A company counts for more when its float-adjusted market value is larger.[S8]
Float-adjusted leaves out closely held shares, which investors cannot buy.[S7]
The same index can give two different return figures:
- Price return counts only the change in the index level.
- Total return also counts dividends.
S&P's Index Mathematics methodology (September 2026) draws this line. A price index moves only with stock prices.[S7]
A total return index moves with stock prices and with dividends put back into the index.[S7]
"Average" also has two common meanings. A simple average adds up each year's return and divides by the number of years.
An annualized return is the single yearly rate that would turn the starting amount into the ending amount over the period. The SEC's fund form calculates "average annual total return" this way.[S6]
The two can differ a lot, because a loss and a gain do not cancel out:
Why can an average hide years of losses?
An average is one number for a whole period, so the path disappears. No single year needs to look anything like the average.
Stock prices move down as well as up.[S1] FINRA says they fluctuate and can go down, sometimes quite dramatically.[S2]
To see the index's own returns over periods such as 1, 3, 5 and 10 years, go to the S&P 500 page at S&P Dow Jones Indices. Look for whether each figure is a price return or a total return.
An index figure also differs from what any one person ends up with. Buying and selling stocks involves fees, and inflation reduces buying power.[S1][S4]
An average describes a past period only. Writing about funds, the SEC's investor site says past performance does not predict future returns.[S5]
This article explains the arithmetic. It does not say whether any return is high or low, and it does not suggest what anyone should expect.
Which sources and dates does a return figure need?
A return figure means little without its details. These are the things to find next to any figure:
- Which index. "The market" is not one number, so the index should be named.
- Start and end dates. A different window gives a different figure.
- The as-of date. It shows how old the figure is.
- Price or total return. One includes dividends and the other does not.
- Simple average or annualized. The second example above shows how far apart they can be.
- Who published it. An index's own publisher is a different source from a data-vendor or blog page.
When one of these is missing, you cannot tell whether two figures measure the same thing. Two numbers both called "the average return" can describe different things.
Company numbers work the same way. Every figure on a Cityfort stock page, such as Amazon's, carries its period and its source.
To see what sits behind a share price, read how do stocks work?.