What Is a Good Annual Return? Historical Averages by Asset Class

By the CalcWise editorial team · Updated September 26, 2026 · 7 min read

Ask "what is a good annual return?" and you will hear a confident number — 8%, 10%, 12% — quoted as if it were a fact of nature. It is not. Whether a return is "good" depends on what you are comparing it to, how long you can wait, and how much risk you took to get it. The honest starting point is history: what broad asset classes have actually earned, on average, over very long periods. Publicly available data from sources such as investor.gov's educational materials and the Federal Reserve's economic data tell a consistent story, and it looks roughly like this: stocks about 10% a year before inflation, bonds about 5%, and cash about 3%.

Those three numbers are the backbone of this guide. The rest is learning how to read them without fooling yourself.

Nominal vs. real returns: the distinction that changes everything

Every return figure comes in two flavors, and confusing them is the most common mistake in investing math:

• Nominal return is the number on your statement — your balance grew 10%, full stop.
• Real return is what is left after inflation — what your money can actually buy grew by.

The quick conversion: real return ≈ nominal return minus inflation. More precisely, $1.10 of nominal growth divided by $1.03 of rising prices gives 1.10 ÷ 1.03 − 1 ≈ 6.8% of real growth. (Check: 1.10 / 1.03 = 1.068, so about 6.8%.)

Why does this matter? Because retirement is priced in today's dollars. A portfolio that grows 7% a year while prices rise 3% a year doubles your purchasing power roughly every 18 years. A portfolio growing 7% while inflation runs 7% leaves you exactly where you started, no matter how impressive the statement looks. Whenever you see a historical average below, ask which flavor it is.

U.S. stocks: roughly 10% nominal, 7% after inflation

The broad U.S. stock market — measured by indexes like the S&P 500 and their predecessors back to 1926 — has delivered about 10% per year on average, before inflation, including reinvested dividends. After inflation, that is roughly 7% per year of real growth. These are the long-run figures investor.gov and similar educational sources reference when describing historical stock market performance.

Three crucial footnotes:

• It is an average, not a schedule. Individual years have ranged from gains above 30% to losses worse than −35%. The 10% emerges only across decades — any single decade can look very different.
• Dividends are included. "Total return" counts both price gains and reinvested dividends. Price-only figures understate what investors actually earned.
• It is U.S.-specific. Other countries' stock markets have posted lower long-run averages. The U.S. 20th century was an unusually good century for equities.

At 7% real, money doubles in purchasing power about every 10 years (72 ÷ 7 ≈ 10.3, by the Rule of 72). That compounding is why stocks dominate long-horizon portfolios — and why their volatility makes them unsuitable for money you need next year.

Bonds: roughly 5% nominal

High-quality bonds — U.S. Treasuries and investment-grade corporate bonds — have historically returned around 5% per year nominal over the long run, or roughly 2–3% after inflation. (Check the rough math: 5% nominal minus ~3% inflation ≈ 2% real.)

Bonds earn less than stocks because they promise less uncertainty: a bond pays scheduled interest and returns principal at maturity, while a stock's payout is whatever the business produces. Investors accept lower returns for that predictability.

Bonds' job in a portfolio is usually stability and income, not growth. In a market crash, high-quality bonds have often held their value or risen while stocks fell — which is why the classic retirement portfolio pairs the two. But note the trade-off runs both ways: in the inflation surge of 2022, bonds fell alongside stocks, a reminder that "safer" never meant "safe."

Cash and Treasury bills: roughly 3% nominal

Cash equivalents — savings accounts, money market funds, short-term Treasury bills — have averaged around 3% nominal over the long run. Since inflation has averaged close to 3% over the same span, the real return on cash has historically hovered near zero: your money kept its purchasing power, more or less, and little else.

That is not a failure — it is the job description. Cash exists for safety and liquidity: the emergency fund, the down payment due in two years, the buffer that lets you leave stocks alone during a crash. Expecting cash to build wealth is asking a lifeboat to win a race.

The pattern across all three classes is the market's basic bargain: higher long-run returns have always come with higher short-run uncertainty. There is no historical evidence of an asset that delivered stock-like returns with cash-like calm.

So what counts as a "good" return?

With the averages in hand, here is how to judge any return honestly:

• Compare against the right benchmark. A 6% year is excellent for a bond-heavy portfolio and disappointing for an all-stock one. Judge a portfolio against a blended benchmark matching its own mix — not against the S&P 500's headline number.
• Measure in real terms, after fees. A fund earning 8% nominal with 3% inflation and a 1% fee delivered about 4% of real growth — and that 1% fee consumed roughly one-seventh of the nominal gain (1 ÷ 7 ≈ 14%). Fees are the most predictable drag on returns, and the easiest to control.
• Match the return to the horizon. Over one year, even a "good" stock portfolio can lose 20%. Over thirty years, the averages above have held up. A return is only good or bad relative to the time you gave it.
• Adjust for risk taken. Earning 12% with a portfolio that could just as easily have lost 12% is not obviously better than earning 7% smoothly — especially if you needed the money mid-swing.

And a practical rule of thumb: if someone promises you safe, double-digit annual returns, compare the promise against the numbers above. The entire U.S. stock market, with all its volatility and all its risk, averaged about 10% nominal. Anyone offering more than that without risk is offering something history has never produced.

Want to see what different return assumptions do to your own savings over time? Our Investment Calculator lets you plug in any rate — 3%, 7%, 10% — and watch the decades diverge.

The one sentence to remember

Past performance is not indicative of future results. The 10%, 5%, and 3% figures in this guide are history, not forecasts. They describe a particular country, a particular century, and a particular set of economic conditions — none of which are promised to repeat. Use historical averages to calibrate your expectations and sanity-check your plans, never as forecasts of future gains. No one — no advisor, no fund, no article — can tell you what markets will do next.

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