What rate of return should you expect on investments?
The S&P 500 compounded about 10% a year from 1928 to 2025, but single years ranged from a 44% loss to a 53% gain. For long-term planning with mostly stocks, a cautious 6% to 7% a year before inflation is a realistic figure; use less for a mix with bonds or for money you need within a few years.
Updated October 20, 2026 · 8 min read · Plain math, no product pitches
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What is a good rate of return on investments?
A good rate of return is one that beats inflation by enough to reach your goal, at a level of risk you can live with. There is no single number, because it depends on what you own and how long you hold it. Cash, bonds and stocks each have a very different history.
Your rate of return is how much an investment gains or loses in a year, as a percentage of what you put in, counting both price changes and income such as dividends and interest. Three honest reference points, all from 1928 to 2025 and before inflation, fees and taxes:
- US stocks (the S&P 500): about 10% a year compounded, with huge swings from year to year.
- 10-year US Treasury bonds: about 4.5% a year.
- 3-month Treasury bills, a stand-in for cash: about 3.4% a year, close to what inflation took.
For planning, history is a ceiling to respect, not a number to copy. A cautious figure for a long-term, mostly-stock portfolio is 6% to 7% a year before inflation, or about 4% after 3% inflation. The rest of this guide shows where those numbers come from and what happens to a plan when the real result is higher or lower.
What has the stock market returned?
The S&P 500, an index of about 500 large US companies, compounded about 10.0% a year from 1928 to 2025 with dividends reinvested. The simple average of the yearly returns is higher, 11.9%, because losses hurt compounding more than gains help it.
S&P 500 total return, every year 1928–2025
Dividends included, before inflation, fees and taxes.
Look at the bars rather than the dashed line. Only 4 of the 98 years landed between 8% and 12%, near the long-run figure. Thirty-six years gained more than 20%, and twelve lost more than 10%. The average is real, but almost no single year looks like it.
The answer also depends on which years you pick:
| Years | Compounded per year | Simple average | Losing years |
|---|---|---|---|
| 1928–2025 (98 years) | 10.0% | 11.9% | 26 |
| 1950–2025 (76 years) | 11.6% | 13.0% | 16 |
| 1996–2025 (30 years) | 10.3% | 11.8% | 6 |
| 2016–2025 (10 years) | 14.7% | 15.8% | 2 |
| 1966–1981 (16 years) | 6.0% | 7.4% | 6 |
| 2000–2009 (10 years) | −0.9% | 1.2% | 4 |
A recent ten-year window can make 15% look normal, and a bad one can make stocks look broken. Neither is the right planning number. The longest record is the most useful, and even it is one country’s market over one century.
- End
- what the money grew to
- Start
- what you put in
- t
- number of years
How much does the rate you pick change what you need to save?
A lot. The rate you assume decides how much you need to put away each month, and a few points of difference can double the answer. Try it: the calculator below starts with a $500,000 goal in 30 years at 7%.
Monthly savings calculator
Set your goal, years and rate to see the deposit you need, or pick another chip to solve for something else.
Solve for
Deposit each month
$409.85
To grow $0 into $500,000 in 30 years at 7%, add $409.85 every month.
You put in
$147,544
Growth
$352,456
70% of the total
FV = PV(1 + i)n + PMT × [((1 + i)n − 1) ÷ i]
i = 7% ÷ 12 = 0.5833% a month; n = 30 × 12 = 360 months
$500,000.00 = $0(1 + 0.005833)360 + $409.85 × [((1 + 0.005833)360 − 1) ÷ 0.005833]
Here is what it takes to reach a goal from zero, saving the same amount every month:
| Goal and time | At 5% | At 7% | At 9% |
|---|---|---|---|
| $500,000 in 30 years | $601 a month | $410 a month | $273 a month |
| $1,000,000 in 20 years | $2,433 a month | $1,920 a month | $1,497 a month |
| $1,000,000 in 30 years | $1,202 a month | $820 a month | $546 a month |
| $1,000,000 in 40 years | $655 a month | $381 a month | $214 a month |
At 40 years, assuming 9% instead of 5% cuts the monthly amount to about a third. That is why the rate is the most dangerous input in any plan: an optimistic one makes the goal look cheap.
- PMT
- deposit each month
- FV
- the goal
- i
- monthly rate: yearly rate ÷ 12, as a decimal
- n
- number of months
How do returns vary by how long you hold?
The longer you hold stocks, the narrower the range of yearly results. Over one year almost anything can happen; over twenty years, no stretch in this data lost money. Here is every rolling stretch of the S&P 500 since 1928:
| Held for | Worst, per year | Best, per year | Stretches that lost money |
|---|---|---|---|
| 1 year | -43.8% (1931) | 52.6% (1954) | 26 of 98 |
| 5 years | -12.7% (1928–1932) | 28.3% (1995–1999) | 11 of 94 |
| 10 years | -1.7% (1929–1938) | 20.1% (1949–1958) | 5 of 89 |
| 20 years | 2.4% (1929–1948) | 17.7% (1980–1999) | 0 of 79 |
| 30 years | 8.0% (1929–1958) | 13.6% (1970–1999) | 0 of 69 |
Every rolling stretch of S&P 500 total returns, 1928–2025, compounded. Source: Damodaran, NYU Stern.
- 1 year: from a 43.8% loss (1931) to a 52.6% gain (1954). About one year in four was negative.
- 5 years: 11 of 94 stretches lost money; the worst lost 12.7% a year (1928–1932).
- 10 years: 5 of 89 stretches lost money, the ones starting in 1928, 1929, 1930, 1999 and 2000. Another 8 gained, but less than 4% a year.
- 20 years: none lost money, but the worst made only 2.4% a year (1929–1948), and 5 of 79 made less than 6%.
- 30 years: the worst made 8.0% a year (1929–1958) and the best 13.6% (1970–1999).
What have bonds and cash returned?
Much less than stocks, with much smaller drops. From the same source, 1928 to 2025, before inflation, fees and taxes:
| Investment | Compounded per year | Losing years | Worst year |
|---|---|---|---|
| S&P 500 (stocks) | 10.0% | 26 of 98 | −43.8% |
| 60% stocks, 40% bonds, rebalanced yearly | 8.3% | 21 of 98 | −27.3% |
| 10-year US Treasury bonds | 4.5% | 20 of 98 | −17.8% |
| 3-month Treasury bills (cash) | 3.4% | 0 of 98 | 0.0% |
The 60/40 row is our own calculation from the stock and bond columns, assuming the mix is reset to 60/40 at the start of each year. Its worst 10-year stretch still gained 1.8% a year, against a 1.7% yearly loss for stocks alone. That smoother ride is what the lower return buys.
Recent decades were lower for safe assets: from 1996 to 2025, Treasury bills compounded about 2.3% a year and 10-year Treasury bonds about 3.9%. Over the full 1928–2025 record, consumer prices (the Bureau of Labor Statistics CPI-U, December to December) rose about 3.0% a year. So cash barely kept its buying power, while stocks grew about 6.8% a year after inflation.
Real rate of return: what you earn after inflation →The exact formula, the shortcut that misleads, and what stocks and savings earned after inflation.Why past returns are not a promise
History tells you what was possible, not what will happen. A long record is still only one path, and several things can make your own result worse:
- Where you start. The ten-year stretches starting in 1999 and 2000 both lost money, and they came right after the best five years in the data (1995–1999, 28.3% a year). A great run is not a forecast.
- One market, one century. The S&P 500 is the US market only. There is no guarantee the next hundred years look like the last.
- The index is not your account. These figures have no fees, no taxes and no cash sitting idle. Your own return will be lower by those costs.
- You may not hold on. The index return assumes every dollar stayed invested through 1931, 1974, 2008 and 2022. If you sell after a drop, your return is not the index’s.
None of this says stocks will do badly. It says a plan should still work if they do somewhat worse than their best-known history.
How do you choose a planning rate?
Pick a rate below the historical record for what you own, so the plan has room for a bad stretch. These are cautious planning figures for general education, not predictions or advice:
| Money that is | Cautious figure before inflation | About, after 3% inflation |
|---|---|---|
| Mostly stocks, held 15+ years | 6% to 7% | 3% to 4% |
| A mix of stocks and bonds | About 5% | About 2% |
| Needed within about 5 years | What safe savings pay | About 0% |
Why below history? Because the cost of being wrong is lopsided. Plan too low and you end up with more than you needed, which is easy to live with. Plan too high and you find out late, when there are few years left to fix it. The 9%-versus-7% example above shows the gap: the same monthly saving can end at less than half the goal.
Then make the figure honest for your situation:
- Subtract your costs. A 1% yearly fee turns 7% into 6%. Fees are one of the few parts of your return you control.
- Decide which dollars you want. Use the rate before inflation for future dollars, or the rate after inflation to see the answer in today’s prices.
- Test a worse case. Run the plan again 2 points lower. If it still works, the plan is sturdy. If it breaks, save more or give it more time rather than assuming a higher rate.
The expert freedom planner does that last step for you: its return sensitivity table shows your balance and the age you reach your number at several returns side by side.
How fees and small rate differences cost you →What a 1% fee costs over 30 years, and the parts of your return you can actually control.Sequence of returns: why the order matters
While you are adding money or leaving it alone, the order of good and bad years does not change where you end up. Once you are taking money out, it matters enormously: early losses force you to sell more shares at low prices, and those shares are not there for the recovery.
This is called sequence of returns risk, and it makes the years just before and after you start spending your savings the riskiest ones. It is one reason to hold more bonds and cash as you get close to needing the money: you accept a lower expected return for a smaller chance of selling at the bottom.
Questions people ask
Is a 10% return realistic?
Over very long periods, US stocks have done about that: the S&P 500 compounded about 10% a year from 1928 to 2025, before inflation and fees. It is not realistic to expect it every year or every decade, and 2000 to 2009 lost money overall, so a plan built on 10% leaves no room for a bad stretch.
Is 7% a good rate of return?
For a long-term, mostly-stock portfolio, 7% a year before inflation is a cautious planning figure: below the S&P 500's long history, so a plan built on it has some margin. For cash it would be unusually high, and for a mix with bonds it is on the optimistic side.
What is the average annual return of the stock market?
For the S&P 500 with dividends from 1928 to 2025, the simple average of the yearly returns is 11.9% and the compounded (annualized) return is about 10.0%. The compounded figure is the one that tells you what money actually grew at.
What is a realistic return for a retirement portfolio?
It depends on the mix. From 1928 to 2025, stocks compounded about 10% a year, a 60/40 stock and bond mix about 8.3% and Treasury bonds about 4.5%. A cautious planning figure sits well below those: around 5% to 7% before inflation, lower as the share in bonds and cash rises.
What rate of return should I use for a 5-year goal?
Something close to what safe savings pay, not a stock-market figure. In the S&P 500 record, 11 of 94 five-year stretches lost money and the worst lost 12.7% a year, so money needed in five years is usually planned at a cash rate.
Should I plan with the return before or after inflation?
Either works if you are consistent. A rate before inflation gives an answer in future dollars; a rate after inflation (about 4% instead of 7%, at 3% inflation) gives the answer in today's dollars, which is easier to compare with what things cost now.
How often does the stock market go down in a year?
In 26 of the 98 years from 1928 to 2025 the S&P 500 had a negative total return, a bit more than one year in four. Twelve of those years lost more than 10%.
What is a good rate of return on a savings account?
A good savings rate at least keeps up with inflation, so your money keeps its buying power. Cash has historically earned far less than stocks: 3-month Treasury bills compounded about 3.4% a year from 1928 to 2025, close to inflation over the same years.