Can you really get a 12% return on your investments?

When Dave says you can expect to make a 12% return on your investments, he’s using a real number that’s based on the historical average annual return of the S&P 500.

The S&P 500 gauges the performance of the stocks of the 500 largest, most stable companies in the New York Stock Exchange—it’s often considered the most accurate measure of the stock market as a whole.

The current average annual return from 1923 (the year of the S&P’s inception) through 2016 is 12.25%.(1,2) That’s a long look back, and most people aren’t interested in what happened in the market 80 years ago.

So let’s look at some numbers that are closer to home. From 1992 to 2016, the S&P’s average is 10.72%. From 1987 to 2016, it’s 11.66% In 2015, the market’s annual return was 1.31%. In 2014, it was 13.81%. In 2013, it was 32.43%. (3)

So you can see, 12% is not a magic number. Based on the history of the market, it’s a reasonable expectation for your long-term investments. It’s simply a part of the conversation about investing.

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