This article indicates that the average rate of return for stocks is 4% after inflation, fees, and taxes (called "net-net-net" in the article).

In the article several investment professionals are asked what they could guarantee for a net-net-net rate of return. The highest guarantee is 4%.

I measure my investing performance yearly but haven't measured it over the entire time I have been investing. I'm sure I don't come close to 4%.

I would gladly let someone else handle all my investing if they could guarantee a 4% net-net-net rate of return. Hell, I'd be perfectly happy with 2%.

What do you think is a reasonable rate of return?

  • 5
    If anyone is guaranteeing any rate of return, they are (a) a crook; (b) dangerously overconfident; or (c) don't know what they are talking about.
    – JohnFx
    Nov 8, 2010 at 15:44
  • 1
    I don't understand your question. Are you asking what the best "reasonable" rate of return is? Or what the best "Guaranteed" rate of return is? Are you looking to use this rate of return just for your personal forecasts? How will you use this information?
    – Alex B
    Nov 8, 2010 at 17:24
  • @Alex - good questions. The article enlightened me in terms of realistic expectations. I was using the question to share the article as well as solicit feedback from other in terms of what was realistic in terms of returns when investing.
    – Muro
    Nov 8, 2010 at 23:19
  • 1
    Where in the article do you see anything about investment professional guaranteeing anything?
    – Jer
    Feb 28, 2014 at 19:14
  • If you want a guaranteed return, you should be investing in something like low-risk bonds, not stocks. If all you're looking for is a reasonable long-term estimate of what you can expect from stocks, then you can take the average return on stocks in the US, which is about 8-10%, and subtract the average rate of inflation in the US over the last century, which is about 3%. Fees should not be significant. It doesn't make sense to express taxes as a yearly percentage, since they apply only at the end, when you sell.
    – user13722
    Sep 6, 2014 at 1:33

4 Answers 4


Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money.

Nobody can guarantee a return on stocks. That's utter bullshit. Stock go up and down according to market emotions. How can your guru predict the market's future emotions?

Keep your head cool with stocks. Only buy when you are 'sure' you are not going to need the money in the next 10 years. Buy obligations before stocks, invest in 'defensive' stocks before investing in 'aggressive' stocks. Keep more money in obligations and defensive stock than in aggressive stocks. See how you can do by yourself.

Before buying (or selling) anything, think about the risks, the market, the expert's opinion about this investment, etc. Set a target for selling (and adjust the target according to the performance of the stock).

Before investing, try to learn about investing, really. I've made my mistakes, you'll make yours, let's hope they're not the same :)


Seems like you should be aiming to beat the professionals, otherwise why not let them handle it? So 4.01% is a logical start. Perhaps round that up to 4.05%

  • 6
    Show me a professional who can GURANTEE 4% and I'll sign up today. I've tried professionals. With the added fees it makes it hard for them to do better than the average investor.
    – Muro
    Nov 8, 2010 at 3:11
  • 7
    @muro Madoff guaranteed what, 10%? No reputable professional will ever guarantee a certain rate of return. Investing is always a risk. I'm with Anonymous Type here. Start by trying to beat the professionals. Or, as the Motley Fool has been advising for a quite a while: try to match the S&P500 (or some other broad index). If you can not match it, then you should simply invest through a low cost index fund and enjoy the extra free time. Nov 8, 2010 at 11:17
  • 1
    If you are going to buy funds, look at their Morningstar rating. Below 3 is under par, 3 is par and over 3 stars are better (in their sector), so buy 4 or 5 star funds with low costs.
    – GUI Junkie
    Nov 8, 2010 at 16:32

What do you think is a reasonable rate of return?

A reasonable rate really breaks down into three things: opportunity cost, what you need, and risk appetite.

Opportunity cost comes into play because whatever returns you make should at least exceed, after expenses, the next best option. Typically the "next best option" is the risk free return you can get somewhere else, which is typically a savings account or some other (safe) investment vehicle (e.g. a guaranteed investment certificate/GIC, bonds, etc). But, this opportunity cost could also be an alternative investment (e.g. an index ETF), which is not necessarily risk free (but it may represent the next best option).

Risk appetite comes down to the amount of risk you are willing to take on any investment, and is completely subjective. This is typically "how much can you sleep with losing" amount.

What you need is the most subjective element. All things being equal (e.g. identical risk profiles, access to same next-best-thing to invest in), if your cost of living expenses are only expected to go up 2% per year, but mine are expected to go up 3% per year, then my reasonable rate of return must exceed 3%, but yours must only exceed 2%.

That said, an appropriate return is whatever works for you, period. Nobody can tell you otherwise.

For your own investing, what you can do is measure yourself against a benchmark. E.g. if your benchmark is the S&P 500, then the S&P 500 SPDR ETF is your opportunity cost (e.g. what you would have made if you didn't do your own investing). In that way, you are guaranteed the market return (caveat: the market return is not guaranteed to be positive).

As an aside..

Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money.

There is nothing wrong with letting someone else handle your money, provided you can live with the triple constraint above. Investing takes time and effort, and time and effort equals opportunity. If you can do something better with the time and effort you would spend to do your own investing, then by all means, do it. Think about it: if you have to spend 1 day a month managing your own investments, but that day costs you $100 in foregone income (e.g. you are a sole proprietor, so every day is a working day), that is $1,200 per year. But if you can find an investment advisor who will manage your books for you, and costs you only $500 per year, what is the better investment? If you do it yourself, you are losing $1,200. If you pay someone, you are losing $500. Clearly, it is cheaper to outsource.

Despite what everyone says, not everyone can be an investor. Not everyone wants to live with the psychological, emotional, and mental effort of looking up stocks, buying them, and then second guessing themselves; they are more than happy to pay someone to do that (which also lets them point the finger at that person later, if things go sideways).

  • Really? Why a down vote?
    – tendim
    May 30, 2017 at 18:39

If someone is guaranteeing X%, then clearly you can borrow money for less than X% (otherwise his claim wouldn't be remotely impressive). So why not do that if his 4% is guaranteed? :)

Anyway, my answer would be that beating the market as a whole is a "decent" rate of return. I've always used the S&P 500 as a benchmark but you can use other indices or funds.

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