Expected Annual rate of return for stocks
Hello Terry…my adult daughter went to an investment advice appointment at a local Fidelity office. She was told she could expect a 11% annual return on her Roth IRA portfolio, consisting of mutual funds, and 16% was possible if she opened a brokerage account. I thought both these numbers were outrageously high and not accurate. She hasn’t done anything yet. She is 38yrs old.
So, what is the annual return rate someone can expect? Also, what do you think about this person’s comments. Thank you.
Terry Says
I’m astounded that anyone working for Fidelity would make those statements. Yes, there have been years. In fact, I asked Perplexity for the total return of the S&P 500 (including dividends) for the past 10 years. Here are the results:
2016 — 11.96%
2017 — 21.83%
2018 — -4.38
2019 — 31.49
2020 — 18.40
2021 — 28.71
2022 — -18.11
2023 — 26.29
2024 — 25.02
2025 — 17.88
BUT the AVERAGE annual return of the S&P 500 over the last 100 years is 10.1%, with dividends included.
Indeed, we have participated in an astounding bull market. But if “reversion to the mean” happens, we might be in line for some huge down years. No one knows for sure.
However, it is illegal and totally improper to promise, illustrate, or predict future results from the recent past. I’m sure the Fidelity employee has never lived through a BEAR market, which has sent the index plunging as much as 50% (before ultimately rebounding).
Notably, in 1974, there was a 48% decline from peak to trough.
In 2000-2002, there was a 49% decline.
And from 2007 to 2009 there was a 57% decline!
Most people panic and sell at the bottom. That’s what makes bottoms!!
Over the long run it has made sense to invest in this broad cross-section of America’s businesses. BUT, you need perspective or you will get shaken out at just the wrong time!
Please show this to your daughter. In fact, now that I’ve done this research, maybe I’ll turn it into a column. Thanks for the idea!
