What Is a Good Annual Investment Return?

Published 2026 · 3 min read

The short answer: for a diversified stock portfolio, planning around 7% per year, before inflation, is sensible. That's roughly what the US stock market has averaged historically over long periods. It sounds modest compared to the 10–15% people brag about — and that gap is exactly where the lies live.

Why "10% average" misleads you

Markets don't return 10% every year. They return +30% some years and −20% others. A few lucky years can inflate a short-term average, and one bad year at the wrong time can undo years of progress. Average annual return is not the same as the annualized return you actually experience.

Banks and salespeople quote the impressive numbers. A conservative 7% keeps your plan honest.

The honest range

• Savings accounts / CDs: ~1–4%, essentially risk-free.
• Bonds: ~3–5%.
• Diversified stocks (long term): ~7–9% nominal, before fees and taxes.
• Individual hot stocks: whatever the story says — treat as gambling.

What you can control

You can't control the market's return, but you can control fees, holding period, and how much you contribute. A low-fee index fund held for 20 years with steady contributions will beat almost any actively-traded guess.

Try it with your numbers

Plug your starting amount, monthly contribution and a rate into the investment return calculator. Run it once at 7% and once at 10% — the difference shows exactly how much optimism you're relying on.