The 10% S&P 500 Myth: How the Market Actually Works

Let’s clear up a massive myth right now.

You’ve probably heard every personal finance guru yell, "Just invest in the S&P 500, it makes 10% every single year!"

Spoiler alert: It doesn't.

The market is a wild roller coaster, not a smooth escalator.

Here is what that "10% average" really looks like, how I actually invest my money, and how you can build real wealth without losing your mind.

Does the S&P 500 Really Give You 10% Every Year?

Over the last century, the S&P 500 has averaged an annualized return of roughly 10%.

However, "average" is the ultimate trickster.

In reality, the market almost never sits at a calm 10% in any given calendar year.

One year it is up 25%, the next year it plummets by 18%, and then it rips up by 18% again.

Think of it like grabbing a quick coffee.

Some mornings your iced latte costs $5, and occasionally a surge price hits $7.

Over five years, your average daily coffee cost might sit right at $5.50, even if you rarely paid that exact amount on any single day.

Investing works the exact same way.

The 10% figure is a long-term destination, not a smooth annual guarantee.

What I Personal Invest In: S&P 500 vs. Total Market

While everyone obsessively talks about the S&P 500 (like Vanguard’s VOO), I actually put my own money into the Vanguard Total Stock Market ETF (VTI or VUN for Canadians). (PortfolioLab)

The S&P 500 tracks 500 of the largest U.S. companies.

VTI tracks the entire U.S. stock market—over 3,700 large, mid, and small companies.

People often assume a broader total market index like VTI will consistently outperform the S&P 500 because it includes fast-growing small-cap stocks.

Looking at the long-term data, however, their performance is nearly identical.

While the giant tech stocks in the S&P 500 have given VOO a tiny edge in recent years, both funds track each other almost line-for-line.

I choose VTI because I like owning every single publicly traded company in America, giving me maximum diversification in a single asset.

Market Dips Happen: How I Turn Crashes Into Sales

When stock prices drop, people panic.

They turn on the news, see red numbers, and sell everything.

I do the opposite.

One book that completely transformed my financial trajectory is The Simple Path to Wealth by JL Collins.

His core philosophy is brilliantly simple: the market always moves up over long horizons, so market crashes are just stocks going on sale.

I never try to time the market by predicting when the peak or bottom will happen.

Instead, I hold a dedicated cash reserve alongside my routine automated investments.

When a market dip occurs, I use that extra cash to buy more shares of my ETF at a discount. 

Think of it like your favorite pair of sneakers going on a 20% flash sale.

You wouldn't run out of the store screaming in fear - you’d buy a pair before the price goes back up!

Things I did when started Investing

It comes down to simple, repeatable commands.

• Shop for a brokerage account. For instance, Fidelity, Vanguard, or trading apps like Robinhood (or Wealthsimple for Canadians)
• Set up auto-deposit. Transfer a fixed amount (even $50 a month) automatically on payday.
• Buy a broad index ETF. Pick VTI or VOO and set up automatic recurring purchases.
• Build a cash buffer. Keep 3–6 months of living expenses in a High-Yield Savings Account so you never have to panic-sell during a dip.
• Ignore the daily financial news. Stop checking your portfolio balance every five minutes.

The stock market isn't a get-rich-quick scheme, but it is the single most reliable wealth-building machine ever created.

Stop waiting for the "perfect time" to invest.

Put your strategy on autopilot, keep some cash ready for the dips, and let compound growth do the heavy lifting for you over time.

Psst... I was once terrible with money by the way! Check out my previous post - I Wasted My 20s Not Saving Money (Here is How I Fixed It)

TL;DR

• The 10% average is real over long periods, but single-year returns are almost never exactly 10%.
• Market dips are normal, temporary, and actually present buying opportunities if you hold cash.
• Vanguard Total Stock Market ETF (VTI or VUN for Canadians) covers the entire U.S. market, keeping performance neck-and-neck with the S&P 500.
• Trying to time the market fails; consistent buying wins every time.
• Building wealth requires simple habits, direct action, and automated systems.

Disclaimer: I am a blogger! Not a certified financial planner or registered investment advisor. The information shared in this post is based solely on my personal experience and is for educational and entertainment purposes only. Always do your own research or consult with a licensed professional before making any financial decisions.