Expectations for return from the stock market Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market.
A good return on investment is generally considered to be about 7% per year, based on the average historic return of the S&P 500 index, and adjusting for inflation.
If you can afford to put away $1,400 per month, you could potentially save your first $100k in just 5 years. If that's too much, aim for even half that (or whatever you can). Thanks to compound interest, just $700 per month could become $100k in 9 years.
S&P 500 5 Year Return is at 57.45%, compared to 55.60% last month and 73.30% last year. This is higher than the long term average of 44.33%. The S&P 500 5 Year Return is the investment return received for a 5 year period, excluding dividends, when holding the S&P 500 index.
According to conventional wisdom, an annual ROI of approximately 7% or greater is considered a good ROI for an investment in stocks. This is also about the average annual return of the S&P 500, accounting for inflation. Because this is an average, some years your return may be higher; some years they may be lower.
Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. However, keep in mind that this is an average. Some years will deliver lower returns -- perhaps even negative returns. Other years will generate significantly higher returns.
A 20% return is possible, but it's a pretty significant return, so you either need to take risks on volatile investments or spend more time invested in safer investments.
Stock market returns since 2010
This is a return on investment of 375.03%, or 12.65% per year. This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 243.18% cumulatively, or 9.88% per year.
To go from $1 million to $2 million likewise requires 100% growth, but the next million after that requires only 50% growth (and then 33% and so on).
But if you wait even five years to start saving that $300 a month, you'll end up with roughly $719,000, instead. To be clear, that's still a respectable amount of savings to kick off retirement with. But let's face it -- it's not $1 million.
ROI of 50% can be considered good, but there are other factors to consider to understand if your investment was a good one.
Typically, long-term investing means five years or more, but there's no firm definition. By understanding when you need the funds you're investing, you will have a better sense of appropriate investments to choose and how much risk you should take on.
The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2022, had an annual compounded rate of return of 12.6%, including reinvestment of dividends.
But it's important to note that the S&P 500 index itself does not pay dividends—the companies in the index do. An investor has to buy shares of the companies themselves or of index funds in order to receive dividends. “The S&P itself does not pay a dividend,” explains Titan investment manager Christopher Seifel.
High-quality bonds and fixed-indexed annuities are often considered the safest investments with the highest returns. However, there are many different types of bond funds and annuities, each with risks and rewards. For example, government bonds are generally more stable than corporate bonds based on past performance.
The S&P 500 Index, shown in bright red, delivered its worst ten-year return of -3% a year over the ten years ending in February 2009. The best ten-year return, of 20% a year, occurred over the ten years ending in August 2000.
(However, one could achieve a 150/0 through the use of leverage, with a margin account. But, know that any investment return must be netted against the cost of leverage, i.e. the interest rate charged for the funds borrowed.) In short, achieving a sustained 30% stock market return is highly unlikely to happen.
It is not worth your time to do any investment if it cannot bring you 12 to 15 percent per year. Investing properly is not a gamble. We should not lose money in the stock market on a long term basis. In fact, a near guaranteed return of 15% or higher is a realistic expectation.
Generally speaking, if you're estimating how much your stock-market investment will return over time, we suggest using an average annual return of 6% and understanding that you'll experience down years as well as up years.