are stocks profitable? Long-term guide

Are stocks profitable? This guide explains how equities generate returns (price gains + dividends), summarizes century-scale and recent empirical performance, describes how profitability is measure...

2025-12-25 16:00:00

By Crypto Scribe

Article rating

4.7

111 ratings

Bitget offers a variety of ways to buy or sell popular cryptocurrencies. Buy now!

A welcome pack worth 6200 USDT for new users! Sign up now!

Are stocks profitable?

Are stocks profitable is one of the first questions new investors ask. In simple terms: historically, stocks (equities) have produced positive long-term returns for many investors, but profitability depends on your time horizon, portfolio choices, costs, taxes, and behavior. This guide explains how stocks generate returns, what the historical evidence shows, how to measure profitability, what factors change outcomes, and practical steps that tilt the odds toward a profitable result — all in plain language and with data-based context.

Note: This article is informational and not investment advice. For custody, trading, or retail crypto on-ramps, Bitget and Bitget Wallet are recommended platform options for readers exploring execution and custody features.

Definition and basic mechanics

What are stocks and how do investors earn money?

Stocks (equities) represent fractional ownership in a company. Shareholders participate in a company’s profits and losses.
Investors earn returns from stocks in two main ways:
- Capital gains: the stock price rises and you sell for more than you paid.
- Dividends: some companies pay a portion of profits to shareholders as periodic cash payments.
Stock prices form from supply and demand in the market, which reflects expectations about future company earnings, growth, interest rates, macro conditions, and investor sentiment. Company fundamentals (revenue, profit margins, competitive position) and broad macro events (economic growth, monetary policy, geopolitical news) both matter.

(Source: Edward Jones overview of how stocks work.)

Are stocks profitable: historical performance of stocks

Short answer from long-term data: equities have historically outperformed bonds and cash over long horizons, delivering higher nominal and (in many countries) positive real returns after inflation — but with large year-to-year volatility and periodic multi-year drawdowns.

Key points:

The commonly cited long-term nominal average for U.S. large-cap stocks (as represented by broad indices like the S&P 500) is roughly 10% per year (price appreciation plus dividends) across many decades of data. This is a rough long-run nominal average — realized shorter-term returns can differ substantially. (Sources: The Motley Fool; Nasdaq; Bankrate.)
Total return (price return plus dividends, reinvested) is the standard measure used to evaluate profitability over time. Price-only returns understate the historical case because dividends contribute materially to long-run gains. (Sources: The Motley Fool; Bankrate.)

As of June 30, 2025, endowment performance reporting and market commentary underscored one practical implication of long-term equity returns: several large U.S. university endowments underperformed the S&P 500 over the 2016–2025 period, illustrating that active or diversified strategies do not always beat a simple broad equity exposure over long horizons. For example, MarketWatch reported institution-level endowment comparisons and noted the S&P 500 outperformed many endowment portfolios across 2016–2025 performance windows. (As of June 30, 2025, according to MarketWatch.)

Long-term averages and multi-decade evidence

Century-scale datasets (including the UBS Global Investment Returns Yearbook 2025 and historical U.S. market series) show that equities have outperformed bonds and cash over multi-decade horizons in many countries. The equity premium (extra return for owning stocks instead of low-risk bonds) is a central finding: over long horizons, equities tended to reward investors who tolerated volatility. (Source: UBS Global Investment Returns Yearbook 2025.)
These long-run averages are statistical aggregates: they conceal tremendous cross-country variation and long periods when equities underperform. Real (inflation-adjusted) returns are lower than nominal returns and can be negative in certain historical pockets.

Recent decade and multi-year snapshots

Trailing 10-, 20-, and 30-year annualized returns often differ from long-run averages. For example, the S&P 500 produced unusually strong multi-year returns in some recent windows (driven by technology and concentrated winners), while other periods (e.g., early 2000s, 2008 crisis) produced weak or negative multi-year realized returns.
Market news examples show the practical variability in equity returns. Broadcom (AVGO) experienced sharp intraday moves tied to news yet delivered large multi-year gains to long-term shareholders: an example cited by market commentary noted that an investment of $1,000 in Broadcom five years earlier was worth roughly $7,503 — illustrating how single-stock long-term returns can be large but also highly idiosyncratic. (As of January 15, 2026, according to Benzinga.)

How profitability is measured

Common measures investors and researchers use:

Total return vs. price return: Total return includes dividends reinvested; price return does not. For long-run profitability, total return is the more complete metric. (Bankrate; Motley Fool.)
Nominal vs. real returns: Nominal returns ignore inflation; real returns subtract inflation to show purchasing-power growth. Long-term investors typically focus on real returns to understand true profit.
Risk-adjusted metrics: Sharpe ratio (return per unit of volatility) and similar measures compare returns relative to risk taken.
Cumulative growth and compound annual growth rate (CAGR): these show how an initial investment grows over time with compounding.

(Source: Bankrate; UBS Yearbook.)

Factors that determine whether stocks are profitable for an investor

Whether stocks are profitable for a particular investor depends on several controllable and uncontrollable factors:

Time horizon: Longer horizons generally increase the probability of positive real returns because they allow recovery from temporary drawdowns and let compounding work. (Bankrate; Motley Fool.)
Diversification and asset allocation: Spreading investments across sectors, capitalizations, and countries reduces company-specific (idiosyncratic) risk. A concentrated position can yield higher upside but raises the risk of large losses.
Fees, taxes, and implementation costs: Management fees, trading commissions, and taxes (on dividends and capital gains) reduce net returns. Low-cost index funds and ETFs reduce the drag of fees. (NerdWallet; Bankrate.)
Dividend reinvestment and compounding: Reinvesting dividends increases long-run growth due to compounding.
Company fundamentals and sector exposure: Profitability depends on the quality of businesses you own — secular winners or durable franchises tend to deliver better outcomes.
Market valuation and entry timing: High valuations at purchase predict lower expected future returns; timing markets is difficult and risky. (UBS Yearbook.)
Macroeconomic environment: Inflation, interest rates, and monetary policy influence valuations and near-term returns.

Time horizon and compounding

Historical evidence shows that the longer investors remain invested, the more likely the portfolio will recover from drawdowns and benefit from compounding. For example, short holding periods can produce negative outcomes even when long-run averages are positive.
Dividends and reinvestment materially boost long-term cumulative returns; a significant share of long-run stock returns historically came from dividends and their reinvestment.

(Source: Bankrate; Motley Fool.)

Diversification and concentration

Diversification across many stocks and sectors reduces idiosyncratic risk (the risk that a single company fails). Academic and practitioner research (UBS Yearbook; Motley Fool) shows that diversified equity portfolios have smoother ride and more predictable long-run outcomes than concentrated single-stock bets.
Institutional portfolios sometimes underweight broad-market exposure for risk-management reasons. MarketWatch reported that many university endowments used diversified or alternative strategies and underperformed the S&P 500 over certain recent windows (2016–2025), illustrating the trade-off between stability and growth. (As of June 30, 2025, according to MarketWatch.)

Costs, taxes and implementation

Fees and costs compound over time. Index funds and ETFs with low expense ratios historically help improve net returns for investors by minimizing drag. (NerdWallet; Bankrate.)
Taxes on dividends and capital gains reduce realized profitability for taxable accounts. Using tax-advantaged accounts (retirement accounts) where possible can help preserve gross returns.

Strategies that have historically improved investor outcomes

Several straightforward approaches have consistently helped investors improve the probability of realizing a profit from equities:

Passive investing (index funds/ETFs): Broad-market index funds capture market returns at low cost. Over long periods many passive approaches outperform the average active manager after fees. (NerdWallet; Motley Fool.)
Dollar-cost averaging (DCA): Investing fixed amounts periodically reduces the risk of poor timing when entering the market and smooths purchase costs.
Buy-and-hold with dividend reinvestment: Holding diversified equities over decades and reinvesting dividends harnesses compounding.
Balanced allocation and rebalancing: Mixing equities with bonds or other assets reduces portfolio volatility and the emotional risk of selling after declines. Periodic rebalancing enforces buy-low/sell-high discipline.
Quality and diversification tilt: Allocations that favor diversified exposure to profitable, cash-generating companies (quality) and value or dividend-paying stocks have historically shown long-run benefits, though factor premiums can have long droughts. (UBS Yearbook; Motley Fool.)

Contrast with active trading and market timing:

Frequent trading and attempts to time the market tend to reduce net returns because of transaction costs, taxes, and the difficulty of consistently predicting short-term market moves.

(Source: NerdWallet; Edward Jones; The Motley Fool.)

Risks and limits to profitability

Stocks are not guaranteed to be profitable. Major risks include:

Volatility and drawdowns: Equity markets can fall sharply (bear markets) and take years to recover.
Sequence-of-returns risk: For retirees or those withdrawing assets, the order of returns matters; bad returns early in retirement can permanently reduce lifetime income potential.
Inflation risk: High inflation erodes the real value of nominal returns.
Company failure risk: Individual firms can fail, leading to total loss of invested capital.
Behavioral biases: Panic selling or chasing recent winners can crystallize losses or reduce long-term returns.
Valuation-driven low future returns: If market valuations are high when you invest, expected future returns are typically lower.

Academic and industry research (UBS Yearbook and others) emphasizes that the historical outperformance of equities is conditional on investors tolerating periods of poor performance and staying invested over long periods.

Empirical research and notable findings

The UBS Global Investment Returns Yearbook 2025 shows that, across many developed markets, equities have provided higher returns than bonds and cash over long horizons, but with substantial cross-country differences. Factor premiums (e.g., value, size, quality) have been identified in academic literature, but they are not guaranteed and can experience long periods of underperformance.
Institutional experience: MarketWatch’s reporting on university endowments (data through fiscal-year 2025) demonstrates that some large portfolios with diversified, active strategies underperformed the S&P 500 over a 10-year window, highlighting the trade-off between return potential and volatility management. (As of June 30, 2025, according to MarketWatch.)

Practical guidance for individual investors

A checklist to assess whether stocks are likely to be profitable for you personally:

Define goals: Retirement, wealth accumulation, major purchases — each goal implies a time horizon and acceptable risk.
Determine your time horizon: Stocks are more likely to be profitable over multi-decade horizons.
Assess risk tolerance: Can you tolerate a 30–50% drawdown in a single year? If not, lower equity allocations may be appropriate.
Prefer low-cost, diversified vehicles: Broad index funds, ETFs, and diversified mutual funds minimize implementation costs.
Reinvest dividends: This materially raises long-run compound growth.
Keep fees and taxes low: Use tax-advantaged accounts and low-expense funds when possible.
Maintain discipline: Avoid panic selling during downturns; rebalance periodically.
Use dollar-cost averaging for new contributions to reduce timing risk.

(Source: NerdWallet; Edward Jones; Bankrate.)

Example allocation approaches by time horizon and risk tolerance

Aggressive / long horizon (e.g., 20+ years): 80–100% equities, diversified across large-cap, mid/small-cap and international exposure. Use low-cost ETFs or index funds.
Moderate horizon (10–20 years): 60–80% equities balanced with bonds or cash-like holdings to smooth volatility.
Short horizon / lower risk tolerance (<10 years): 30–50% equities with safer allocations to bonds, cash, or short-duration instruments.

Target-date funds and balanced funds provide automated glidepaths (equity share declines as retirement approaches) and can be suitable for hands-off investors.

(Source: Edward Jones; NerdWallet.)

Frequently asked questions (FAQ)

Q: Are stocks always profitable? A: No. Stocks are not always profitable in the short term. Historically they have produced positive real returns over long horizons in many markets, but there are periods and countries where long-term performance is weak.

Q: How long should I hold to improve chances of profit? A: Longer is generally better. Many studies cite multi-decade horizons (10–30+ years) as the timeframe that materially increases the probability of positive real returns, though past performance is not a guarantee of future results.

Q: Is it better to pick stocks or buy an index fund? A: For most individual investors, low-cost diversified index funds or ETFs often offer higher odds of achieving market returns after fees and taxes than attempting to pick winners, especially when factoring in time and expertise needed for successful stock selection. (NerdWallet.)

Q: How do dividends affect profitability? A: Dividends contribute a significant portion of long-term total returns, especially when reinvested. Total return (price appreciation plus dividends) is the appropriate metric for measuring profitability.

Criticisms and alternative views

Skeptical perspectives and limits to the standard case include:

Long equity droughts exist: Some countries experienced prolonged low or negative real equity returns over multi-decade periods. Country selection matters.
Valuation-driven lower future returns: High starting valuations can compress future expected returns for the next decade(s).
Institutional needs may favor different mixes: Large endowments and pension funds sometimes pursue diversified or alternative strategies to manage spending needs and reduce volatility — and these strategies can produce different outcomes (as MarketWatch reporting comparing endowments to the S&P 500 shows). (As of June 30, 2025, according to MarketWatch.)
Alternatives may be appropriate: Bonds, real assets, private equity, or commodity exposure can play a role depending on objectives and constraints.

(Source: UBS Yearbook; market commentary.)

Context from recent market reporting (selected examples)

As of June 30, 2025, according to MarketWatch, Harvard’s endowment market value was reported at $56.9 billion. MarketWatch noted that if some endowments had invested solely in the S&P 500 over the 10-year period 2016–2025, their endowment sizes would have been materially larger — a concrete illustration of how different allocation choices and returns affect long-term financial capacity. (MarketWatch reporting, June 30, 2025.)
As of January 15, 2026, market commentary (Benzinga and related outlets) highlighted that individual companies and sectors can generate very different multi-year outcomes. For instance, commentary cited that an investment of $1,000 in Broadcom five years earlier would have been worth approximately $7,503 — an example of how stock selection or sector leadership (e.g., semiconductors) can produce outsized returns for patient investors, while underscoring high volatility and idiosyncratic risk. (Benzinga market coverage, January 15, 2026.)
Recent crypto and digital-asset related institutional discussion shows similar themes: concentrated bets (on crypto or on a single technology) can yield outsized returns if the thesis plays out but carry distinct technology, regulatory, and security risks. For readers using crypto on-ramps or tokenized equity solutions, custody and security are critical considerations. (BeInCrypto and related coverage, various dates in late 2025 and early 2026.)

Practical implementation notes (Bitget-friendly)

If you are exploring execution, custody, or tokenized equity exposure in digital asset formats, consider Bitget for spot trading, custody, and Bitget Wallet for self-custody and on-chain activity. Bitget provides order types, low-fee structures (compare fees before trading), and institutional-style tools suitable for retail and active users.
For long-term stock exposure via traditional markets, use low-cost brokerage accounts and tax-advantaged accounts where available. If you are blending crypto and equities in a broader portfolio, clearly segregate objectives, risk budgets, and rebalancing rules.

Note: Mentioning Bitget here is informational about platform choice and not an endorsement or investment recommendation.

Empirical caution and final practical checklist

Past returns are not guarantees of future results; long-term historical averages are helpful context but not a promise.
Minimize fees and taxes, diversify, set a time horizon, and avoid market-timing. Use buy-and-hold, dollar-cost averaging, and low-cost index vehicles unless you have a clearly defined, well-tested active strategy.
Monitor portfolio drift and rebalance periodically to maintain your risk profile.

Further exploration and resources:

Read long-run studies such as the UBS Global Investment Returns Yearbook 2025 for cross-country return comparisons.
Consult accessible explainers from The Motley Fool, Nasdaq, Bankrate, Business Insider, NerdWallet, and Edward Jones for beginner-friendly primers on returns, dividends, and implementation.

Frequently referenced sources (selected)

UBS Global Investment Returns Yearbook 2025 — long-run returns and cross-country analysis.
The Motley Fool — articles on historical averages and S&P performance.
Nasdaq / Bankrate / Business Insider — practical data and averages for market indices.
NerdWallet — practical “how to make money in stocks” guidance.
Edward Jones — primers on how stocks work and basics for investors.
MarketWatch reporting on endowments and S&P 500 comparisons (reporting through June 30, 2025). (As of June 30, 2025, according to MarketWatch.)
Benzinga market coverage and commentary on individual stock moves and multi-year performance (January 15, 2026). (As of January 15, 2026, according to Benzinga.)
BeInCrypto / crypto market coverage — institutional and corporate crypto developments referenced for comparative context (late 2025–early 2026 coverage).