What average return should I expect from my investments?
Last reviewed: July 2026
Over the long run, a diversified stock portfolio has historically returned about 10% per year before inflation, or roughly 7% after inflation, according to long-term U.S. market data. A balanced portfolio of stocks and bonds has historically landed closer to 7% to 8%. But no single year ever delivers the "average," and that gap between the average and any given year is exactly where most investors get tripped up. Understanding realistic average investment returns is the difference between under-saving and over-saving for the life you actually want.
Key Takeaways
- U.S. large-cap stocks have historically averaged about 10% per year before inflation, or roughly 7% after inflation.
- Nobody earns the average in a straight line; markets swing wildly year to year while trending upward over decades.
- A 60/40 stock-and-bond portfolio has historically returned roughly 7% to 8% per year over long periods.
- The longer your time horizon, the more your actual returns converge toward the historical average.
- Fees, taxes, and your own behavior often matter more to your real return than picking the "best" funds.
About the Author: Jeff Judge, CFP®, AEP®, ChFC®, CLU® is Managing Partner of Chesapeake Financial Planners in Forest Hill, Maryland. He has been helping families and business owners in Harford County and the Baltimore metro area navigate investment planning since earning his CFP® certification in 2013, by using Chesapeake Financial Planners’ signature process, the R.U.D.D.E.R. method™. Jeff has watched more retirement plans get derailed by unrealistic return assumptions than by any market crash.
What Are the Long-Term Historical Average Returns by Asset Class?
Long-run averages give you a starting frame, even though no asset returns the same number every year. Here is what U.S. market history shows over roughly the past century.
| Asset Class | Historical Average Annual Return (Nominal) | Notes |
|---|---|---|
| U.S. Large-Cap Stocks (S&P 500) | ~10% | ~7% after inflation |
| U.S. Small-Cap Stocks | ~11%-12% | Higher returns, much higher volatility |
| International Developed Stocks | ~8%-9% | Varies widely by region and decade |
| Investment-Grade Bonds | ~5%-6% | Lower risk, lower return |
| Cash / Money Market | ~3%-4% | Roughly keeps pace with inflation |
| 60/40 Balanced Portfolio | ~7%-8% | The classic retirement workhorse |
These figures come from long-run U.S. data covering 1926 to the present, including the long-run S&P 500 annualized return and historical bond performance tracked by sources like Morningstar. One word of caution: stocks have produced higher long-run returns than bonds, but the price of those returns is steeper drops along the way. Jeff Judge often reminds clients that an average is a destination, not a description of the trip. You do not get a smooth 10% escalator. You get a roller coaster that, over decades, ends up higher than where it started.
Why Is the "Average" Return So Misleading?
The average return is real, but almost nobody actually earns it in a given year, because markets do not move in straight lines. The S&P 500 has averaged roughly 10% annually over many decades, yet single-year results routinely swing 30 percentage points in either direction. One year the index gains 25%. The next it loses 18%. The "average" only emerges when you string enough of those years together.
Consider how rare an "average" year actually is. According to research summarized by Fidelity and similar long-term studies, annual stock returns landing within a couple of points of the long-run average are surprisingly uncommon. Most years are well above or well below it. This is why expecting a steady 10% every year sets you up for panic. When a normal down year arrives, investors who anchored to the average feel like something is broken. Nothing is broken. Volatility is simply the toll you pay for higher long-term returns. The bond market and stock market both reflect this trade-off, and understanding market volatility is what keeps people invested long enough to capture the average in the first place.
How Does My Time Horizon Change What I Should Expect?
Your time horizon is the single biggest factor in how predictable your returns will be. The longer you stay invested, the more your actual results converge toward the historical average. The shorter your window, the more random the outcome.
- 1-year horizon: Stock returns can land anywhere from roughly -30% to +40%. Essentially unpredictable.
- 5-year horizon: Stocks can still finish negative across a full five-year stretch, as investors saw during the early 2000s.
- 10-year horizon: Most rolling 10-year periods have been positive, and average returns begin to stabilize.
- 20+ year horizon: Historically, U.S. stocks have never produced a negative 20-year rolling return, and results cluster near the long-run average.
This is why a 30-year-old saving for retirement and a 68-year-old already retired should not use the same return assumption or the same portfolio. Jeff Judge tells clients that time is the closest thing investing has to a guarantee: it does not eliminate risk, but it tames it. If you want to see how your mix should shift as you age, How should my investment mix change as I get closer to retirement? walks through it decade by decade.
What Return Should I Use for My Own Retirement Plan?
For planning purposes, use a conservative estimate below the historical average so you protect yourself against disappointment. Many planners build retirement projections around a 6% to 7% nominal return for a growth-tilted portfolio, and lower for a more conservative mix, even though stocks have historically averaged closer to 10%. The reason is simple: planning with the absolute best-case number is how people end up short.
At Chesapeake Financial Planners, we use the R.U.D.D.E.R. Method™, our six-step planning process: Review and Recognize, Uncover and Understand, Design and Develop, Discuss and Decide, Execute and Empower, and Reassess and Refine. Return assumptions live in the Design and Develop step, and we stress-test every plan against weaker markets, not just strong ones. Your actual portfolio return also depends heavily on costs. Investment fees and expense ratios quietly subtract from your return every single year, which is why reducing them matters as much as chasing performance. The same goes for How Can I Avoid Making Emotional Investment Decisions?, because the gap between investor returns and investment returns is almost always behavior, not the market.
Frequently Asked Questions
What is a realistic average return for a retirement portfolio?
A realistic planning return for a diversified retirement portfolio is roughly 6% to 8% per year before inflation, depending on your stock-to-bond mix. While U.S. stocks have historically averaged about 10% annually, most planners use a more conservative figure to avoid over-projecting growth and under-saving for retirement.
Why doesn't my portfolio earn the average return every year?
Your portfolio does not earn the average every year because markets are volatile by nature. Stocks might gain 25% one year and lose 18% the next, so the "average" only appears when you combine many years. In any single year, your return will almost always be well above or well below the long-run average.
How much should I expect from a 60/40 stock and bond portfolio?
A 60/40 portfolio, meaning 60% stocks and 40% bonds, has historically returned roughly 7% to 8% per year over long periods. It delivers smoother results than an all-stock portfolio, sacrificing some upside in exchange for smaller drops during downturns, which makes it a common choice for investors nearing or in retirement.
Do international stocks earn the same return as U.S. stocks?
International developed stocks have historically averaged about 8% to 9% annually, slightly below long-run U.S. averages, though results vary widely by region and decade. International and U.S. markets often lead at different times, which is why holding both can smooth your overall portfolio returns rather than chasing whichever recently performed best.
How do fees affect my investment returns?
Fees directly reduce your net return every year, and the effect compounds over decades. A fund charging 1% more than a comparable low-cost option can cost you tens of thousands of dollars over a long investing lifetime. This is why expense ratios and advisory costs deserve as much attention as the underlying returns themselves.
Can I expect higher returns by picking individual stocks?
Picking individual stocks does not reliably produce higher returns and usually increases your risk through concentration. Most investors do better with broadly diversified, low-cost index funds than by trying to outguess the market. Higher potential returns from a single stock come with a real chance of significant, permanent loss that diversification helps you avoid.
If you want a clear-eyed look at the return assumptions baked into your own plan, download our investment planning guide at chesapeakefp.com. It walks through how to set realistic average investment returns expectations and avoid the two most expensive mistakes: assuming too much and assuming too little.
Want to go deeper? Our R.U.D.D.E.R Audit for DIY Investors walks through this step by step.
Disclosures
The information provided is for educational purposes only and should not be construed as investment advice. Investment strategies should be tailored to individual circumstances, risk tolerance, and goals. Past performance doesn't guarantee future results. Consult with qualified financial professionals regarding your specific situation.
Stock investing includes risks, including fluctuating prices and loss of principal.
Advisors associated with Chesapeake Financial Planners may be either (1) LPL Financial Registered Representatives offering securities through LPL Financial, Member FINRA and SIPC, and investment advisor representatives offering investment advice through Great Valley Advisor Group; or (2) solely investment advisor representatives offering investment advice through Great Valley Advisor Group and not affiliated with LPL Financial. Great Valley Advisor Group, and Chesapeake Financial Planners are separate entities from LPL Financial.
