Investing Guide · Updated May 2026

What Is a Good Return on Investment? Benchmarks to Know

Q: What return should I expect from a financial advisor?

Your advisor's investment returns should at minimum track a reasonable benchmark for your allocation after their fees. An advisor charging 1% AUM managing a portfolio returning 7% gross is delivering 6% net, which should be compared to what a low-cost index portfolio of similar allocation would have returned. Advisors add value through financial planning, tax optimization, and behavioral coaching, not necessarily by generating market-beating investment returns.

Q: Should I compare my returns to the S&P 500 if I don't only invest in US stocks?

No. Compare to a blended benchmark that reflects your actual allocation. If you hold 60% US equities, 25% international equities, and 15% bonds, your benchmark should be approximately 60% S&P 500 plus 25% MSCI World ex-US plus 15% US aggregate bond index. Comparing a globally diversified portfolio to the S&P 500 alone will make you look like you underperformed in years when US stocks lead and outperformed when they lag.

"I made 12% last year" sounds excellent until you realize the S&P 500 returned 26% over the same period. Context doesn't just modify the answer to "what is a good return" — context essentially is the answer. Here are the benchmarks that actually tell you where you stand.

12 min read·Informational only — not financial advice

In This Guide

Why "Good Return" Is Always a Relative Question
The Foundational Benchmark: S&P 500 Historical Returns
Good Returns by Asset Class
The Metric Most Investors Skip: Risk-Adjusted Return
Return Benchmarks by Investment Goal
ROI Calculator — Check Your Own Returns
Common Mistakes When Evaluating Returns
Frequently Asked Questions

A precise answer to "what is a good return on investment" requires knowing what you invested in, over what time period, with what level of risk, and compared to what alternative. Strip away those variables and a number floating without reference points is meaningless. The benchmarks below are well-documented and historically grounded — here's how to apply them honestly to your specific situation.

Why "Good Return" Is Always a Relative Question

A return is only good or bad relative to three things simultaneously.

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The Risk Taken

A 15% return from a diversified index fund and a 15% return from a single speculative biotech stock are not equivalent. The index came with moderate, diversifiable risk. The biotech came with the possibility of a 70% loss. Same number, completely different quality.

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The Relevant Benchmark

Your portfolio should be compared to an index that reflects what you actually own — not whatever index happened to perform best that year. A small-cap value portfolio benchmarked against the NASDAQ is a flattering and misleading comparison.

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The Time Period

Single-year returns are noisy. A fund returning 40% then −25% delivered roughly 5% annualized over two years. Multi-year annualized returns are far more informative than any single-year figure — and most investors forget to calculate them.

The Foundational Benchmark: US Stock Market Historical Returns

The S&P 500 is the primary benchmark for US equity investors. Its long-term performance is the most referenced figure in retail investing — it represents the return available to any investor willing to buy a low-cost index fund and hold it. All figures below include dividend reinvestment (total return). Price return alone is roughly 1.5–2 points lower; always verify which measure a quoted return uses.

Time Period	Nominal Annual Return	Real Annual Return (after ~3% inflation)
Since 1928 (long-run avg)	~9.8%	~6.5–7.0%
Last 50 years (1974–2024)	~10.5%	~6.8–7.2%
Last 30 years	~10.7%	~7.0–7.5%
Last 10 years	~12.8%	~9.5–10.0%
Practical investor target	~10% nominal	~6.5–7% real

The last 10 years (highlighted) are partially inflated by a prolonged bull market — using them as a base expectation for future returns overstates reasonable long-run expectations. For planning purposes, the long-run real return of 6.5–7% annually is the most defensible baseline.

Good Returns by Asset Class: The Benchmarks That Actually Apply

Comparing a real estate return to a stock market return without adjusting for risk, leverage, and liquidity is comparing the outcomes of two different games. Here's what "good" looks like across major categories, alongside the long-run historical picture.

The equity risk premium. US equities have historically outperformed long-term government bonds by approximately 4–6 percentage points annually over multi-decade periods. This premium compensates investors for accepting equity volatility. When someone shifts from stocks to bonds for "safety," they're implicitly trading away this premium — worth quantifying before making the decision.

Long-Run Nominal Returns by Asset Class (approx. historical averages)

REITs (public)

~10%

US Equities (S&P 500)

~9.8%

Real estate (direct)

~7%

US Bonds (aggregate)

~4.5%

Cash / money market

~3.2%

Inflation (CPI hurdle)

~3.2%

Real return = bar above the inflation line. Cash and bonds barely clear it. Equities and REITs produce meaningful real gains over time.

Asset Class	Good Long-Run Return	Key Caveat
US Equities (large-cap)	8–12% nominal / yr	Includes dividends reinvested; S&P 500 avg ~9.8%
Actively managed funds	Matching index net of fees	85–90% of active large-cap managers underperform over 15 years
US Bonds (aggregate)	4–5% nominal / 1–2% real	2022 saw −13% — rate-cycle sensitive
Real estate (direct rental)	6–10% cash-on-cash	Leverage-dependent; excludes management burden & vacancy risk
REITs (public)	9–11% nominal	Stock-like liquidity; dividends taxed as ordinary income
Cash / money market	3–4% avg; 4–5% currently	Capital preservation only — not a wealth-building vehicle

Active management reality check. The SPIVA scorecard consistently shows 85–90% of actively managed large-cap US equity funds underperform the S&P 500 after fees over 15-year periods. A fund that matches the index net of costs is a legitimately good outcome — not the floor. "My fund returned the market" is more of an achievement than it sounds.

The Metric Most Investors Skip: Risk-Adjusted Return

Raw return comparisons ignore the volatility required to generate them. Two portfolios both returning 9% annually are not equivalent if one achieved it with steady consistency and the other with stomach-churning swings and a 45% drawdown mid-period. The Sharpe ratio formalises this intuition.

Sharpe Ratio = (Return − Risk-Free Rate) ÷ Std Deviation of Returns

Sharpe below 0.5Poor — return poorly compensates for volatility

Sharpe 0.5–1.0Acceptable — typical for most diversified portfolios

Sharpe 1.0–2.0Good — earning more than 1 unit of return per unit of risk

Sharpe above 2.0Exceptional — rarely sustained; question the data if claimed long-term

Example: Portfolio returns 12%, risk-free rate 3%, std dev 9% → Sharpe = (12−3)÷9 = 1.0 (good)

This is particularly relevant for evaluating leveraged strategies, concentrated positions, and crypto holdings — all of which tend to show impressive raw returns in favorable periods while carrying Sharpe ratios that reveal the risk being taken. A portfolio returning 12% with extreme volatility may have a lower Sharpe ratio than a portfolio returning 9% with steady fluctuations. The 9% portfolio may be the genuinely superior risk-adjusted outcome.

Common Return Benchmarks by Investment Goal

Different goals warrant different return expectations. These are the practical targets by common investor objective.

Investment Goal	Target Return	Achievable From
Beat inflation (capital preservation)	0–2% real / yr	Short-term Treasuries, high-yield savings at current rates
Wealth accumulation (20–30 yr)	6–8% real / yr	Diversified equity-heavy portfolio; historically the S&P 500 range
Retirement income generation	4–6% total return / yr	Balanced portfolio supporting the 4% withdrawal rule
Beating the market (active)	>S&P 500 net of fees	Top 10–15% of all active participants over 10+ years — genuinely difficult
Short-term savings (under 3 yrs)	0–2% real / yr	Capital preservation priority — no equity exposure appropriate

Check your own returns: Use the ROI Calculator below ↓ to calculate your annualized return for any time period and see how it benchmarks against the S&P 500 and inflation.

ROI Calculator

Free · No sign-up

Calculating…

The Mistakes Investors Make When Evaluating Their Returns

Most return evaluation errors aren't calculation errors — they're framing errors that produce convincingly wrong conclusions.

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Comparing to the Wrong Benchmark

A balanced 60/40 portfolio compared to the S&P 500 in a strong equity year flatters underperformance and leads to poor allocation decisions. Use a blended benchmark that reflects your actual allocation.

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Measuring Over Too Short a Period

One year of returns is almost pure noise. Three years is better. Ten years begins to be meaningful. Evaluating an investment strategy on 12 months — in either direction — tells you almost nothing about long-term quality.

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Ignoring Fees in Return Calculations

A mutual fund reporting 10% gross while charging 1.1% in expenses delivered 8.9% net. If the S&P 500 returned 10.2% gross with 0.03% index fund costs, the active fund underperformed by ~1.3 points — while appearing competitive on gross figures.

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Survivorship Bias in Peer Comparisons

The funds and strategies you hear about as success stories are the ones that survived. The ones that closed or quietly underperformed for a decade don't make it into the conversation. Any "what others are getting" comparison is subject to this bias.

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Confusing Nominal and Real Returns

A 9% nominal return during a 5% inflation year is a 3.8% real return. Evaluating investment performance without inflation context systematically overstates wealth creation — particularly over multi-decade holding periods.

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Cherry-Picking Start and End Dates

Measuring from a market low to a market high produces figures that are technically accurate and completely misleading. Consistent calendar-year or rolling-period returns are far more honest measures of actual strategy performance.

Survivorship bias is extreme in active investing discussion. When someone says "my stock picks have returned 18% annually," they almost always mean their current holdings — not a complete accounting of every position opened, including the ones they exited at a loss or closed entirely. A complete performance audit including all trades and cash drag rarely looks as good as the highlight reel.

FAQ: Good Investment Return Questions Investors Ask

Is 10% a good annual return on an investment?

In the context of US equities, 10% nominal annually is approximately in line with the S&P 500's long-run historical average — a market-matching return, not an outperformance. Whether that's "good" depends on what you held and what risk you took. For a bond-heavy or conservative portfolio, 10% would be exceptional. For a concentrated, high-risk portfolio, it might represent significant underperformance relative to the risk absorbed.

What return should I expect from a financial advisor?

Your advisor's investment returns should, at minimum, track a reasonable benchmark for your allocation after their fees are included. An advisor charging 1% AUM managing a portfolio that returns 7% gross is delivering 6% net — which should be compared to what a low-cost index portfolio of similar allocation would have returned. Advisors add value through financial planning, tax optimization, and behavioral coaching — not necessarily by generating market-beating returns.

How do I calculate my own annualized portfolio return?

If you made no contributions or withdrawals during the period: (Ending Value ÷ Beginning Value)^(1 ÷ Years) − 1. If you made contributions or withdrawals at different times — which most investors do — you need a money-weighted return calculation (IRR), which accounts for the timing and size of each cash flow. Most brokerages provide a personal rate of return figure in their performance reporting tools.

Is a 7% return good for a retirement account?

Seven percent nominal is a reasonable expectation for a diversified equity-heavy retirement portfolio over long periods, based on historical averages. In real terms — after inflation — 7% nominal corresponds to approximately 4–4.5% real return in a typical inflation environment. That real return, compounded over 25–35 years, produces substantial wealth. Whether it's "good" also depends on your savings rate and target retirement balance — return alone doesn't determine retirement readiness.

Should I compare my returns to the S&P 500 if I don't only invest in US stocks?

No — compare to a blended benchmark that reflects your actual allocation. If you hold 60% US equities, 25% international equities, and 15% bonds, your benchmark should be approximately 60% S&P 500 + 25% MSCI World ex-US + 15% US aggregate bond index. Comparing a globally diversified portfolio to the S&P 500 alone will make you look like you underperformed in years when US stocks lead — the norm over the past decade — and outperformed when they lag.

Measure Your Returns Against What Actually Matters

A good return isn't a fixed percentage — it's a return that beats your relevant benchmark, compensates you for the risk you took, outpaces inflation in real terms, and gets you toward your actual financial goal. Calculate your annualized return across any time period and compare it against S&P 500 and inflation benchmarks.

Calculate My Return vs Benchmark

⚠️ For informational purposes only — not financial advice.