How often does the S&P 500 lose money?

We've all seen the pictures of traders holding their heads in their hands – surrounded by a sea of red numbers on computer screens – presumably after they've lost a lot of money.

Corrections and crashes are inevitable in the markets.

Time and time again, we've seen bubbles burst after years of over-optimism, like the Nifty Fifty craze of the 70s and the dot-com boom (and bust) at the start of the millennium.

In other cases, it's because of an event that's taken the world by surprise – like the global pandemic 20 years later.

The downturns seen when major stocks on Wall Street fall away from all-time highs can be pretty stomach churning.

After a flurry of young online startups went bust in 2000, the S&P 500 lost 49.1% of its value during a long and punishing decline. That was eclipsed by the global financial crisis seven years later, which led to a 56.8% drop.

But as scary as this all seems, it's important to zoom out and look at the wider picture.

How often does the S&P 500 end up in the red, how frequently do bear markets occur, and how long does it take for investors caught up in the middle to break even again?

While what's happened in the past offers no guarantees for what lies ahead in the future, understanding this index's historical performance can give you greater confidence if you're prepared to take a long-term view.

Ups and downs

Since the index started including 500 companies in 1957, until the end of 2024, the S&P 500 saw an annual increase 48 times, and a decrease 20 times.

This means the S&P 500 has increased around 70% of the time, and lost money around 30% of the time.

Here's what that actually looks like:

If we go back to when the S&P index first launched in the 1920s – which tracked 233 companies at that point – there were 64 years with increases and 32 years with decreases.

With this longer time period, the S&P index lost money exactly one-third of the time when looking at single years in isolation.

But most people investing into index funds don't invest for just one year.

So what happens if we zoom out and look at entire decades?

Decade	Start price	End price	Change (%)
1930s*	21.18	12.49	-41.03
1940s*	12.63	16.76	32.70
1950s*	16.66	59.89	259.48
1960s	59.91	92.06	53.66
1970s	93.00	107.94	16.06
1980s	105.76	353.40	234.15
1990s	359.69	1,469.25	308.48
2000s	1,455.22	1,115.10	-23.37
2010s	1,132.99	3,230.78	185.16

Of the nine decades since the first S&P index was launched, it lost money twice – 22% of the time.

But this figure reduces significantly if we look at rolling decades. For example 1928-1937, 1929-1938, 1930-1939, and so on – every possible 10-year window.

Of the 87 rolling decades completed since 1928, the index has seen a positive return on 75 occasions, experiencing a negative return 12 times.

This means if you'd invested money at the beginning of a calendar year and left it untouched for a full decade – in any year since 1928 – you'd have made a profit 86.2% of the time.

How long do bear markets last?

As this research note from Virtus Investment Partners points out, bear markets tend to happen every six and a half years or so. This is where the S&P 500 falls by more than 20% from its most recent high.

Of course, this timing is just an average – it's not a rule. There have been two bear markets in the 2020s so far already – one because of Covid and another because of a supply chain crisis.

When you take the average of the 11 bear markets that this index has suffered since 1950, you're left with a typical pullback of about 35%, taking 381 days to hit rock bottom.

After that, it takes around 1,100 days on average – three years give or take – for the market to return to a fresh all-time high once again.

But averages don't tell us the whole story.

Sometimes a stock market crash is a lot worse than this, and other times it's less painful.

The bear market that began in 1973 is a good example of this, when an oil shortage dealt a hammerblow to the U.S. economy. Over a period of 630 days, the S&P 500 plunged by 48.2%.

The sheer size of this contraction meant that it took almost six-and-a-half years before the index returned to record highs.

This would have been especially painful for investors who were nearing retirement and ready to withdraw their funds, and helps illustrate the importance of diversification by parking some of your wealth in less volatile assets such as high-interest savings accounts and government bonds.

And as we mentioned earlier, the dot-com bubble was especially damaging for everyday investors.

Between March 2000 and September 2002 – over 929 days – the S&P 500 bled by 49.1%. A fresh all-time high wasn't seen until May 2007.

To make matters worse, the global financial crisis began just four months later.

Dusting off the history books like this helps to illustrate the most challenging periods that investors have had to contend with over the past 70 years. Reflecting on how you would have been affected if you were in this situation can help inform your decision-making.

Would you be able to wait six years to break even? How would you cope with the psychological impact of seeing your portfolio slowly halve in value before your eyes? 

But let's flip the script slightly – and reflect on how the markets can be pretty surprising places at times.

By all accounts, the coronavirus pandemic should have been devastating for the S&P 500 – but when lockdowns were first announced and businesses started to close, the 33.9% peak-to-trough decline in the bear market that followed lasted just 33 days.

Few would have predicted that the next all-time high would come in August 2020…just six months later.

How do markets perform after all-time highs?

Let's say you've just endured an exceptionally long bear market. Your portfolio has finally returned to where it used to be.

But when headlines return of new all-time highs being hit – and the pictures on our TV screens return to smug traders basking in a glow of green numbers – it's easy to get nervous again.

Should you take your money and run after being made whole… or stick it out to see what happens next?

Virtus Investment Partners also battle tested this scenario by looking at what happened to the S&P 500 in the years after it had achieved a full recovery.

Here's a breakdown of its calculations based on the figures that are available.

Date of all-time high after bear market	One year later	Three years later	Five years later	Ten years later
July 1980	20.5%	71.8%	115%	377.3%
November 1982	27.9%	62.9%	131.1%	354.8%
July 1989	6.5%	35.4%	54.8%	396.5%
May 2007	-6.7%	-23.9%	-4.5%	95.5%
March 2013	21.9%	39.8%	86.6%	217.4%

As you can see, the glaring exception here is the recovery after the dot-com bubble burst in 2000, simply because the global financial crisis followed in pretty quick succession (in 2008). That said, the all-time high ten years on was still significantly higher.

Bottom line

Overall, there are a few valuable takeaways here.

The longer the investment horizon, the higher the chance of making a return – historically speaking, at least.

When you add up the total amount of time that the S&P 500 has spent in a bear market since 1928, it represents just 22% of its existence.

And what's more, a whopping 42% of its best-performing days since the early 2000s have occurred during a downturn.

So while it may seem prudent to sit on the sidelines in fear that stocks may retreat further, you could end up missing out.

As the old saying goes, time in the market matters more than timing the market.

Missing surprise rallies when they arise can have a considerable impact on your returns, primarily because you'll be missing out on the power of compounding.

Of course, we all have different circumstances and appetites for risk, and no one truly knows what's coming next. That's why it's important to reflect on your long-term goals, and how an unforeseen bear market would affect your position.

Using an auto-enrolled work-based pension?

The fund you're contributing to might not be right for you

Send the info