How can you get an 8% annual return on investments?

You can use 8% as a long-term investment scenario. Whether your portfolio earns it depends on what you own, the period you invest over, and the costs you pay. For a U.S. investor, the practical question is whether the plan still works at a lower return.

What would an 8% return do to your savings?

Start with $10,000 and add $300 at the beginning of each month for 20 years. The scenarios use effective annual returns, 2.5% annual inflation, and no taxes or fees. Your initial balance and deposits add up to $82,000.

An 8% nominal return with 2.5% inflation is about 5.37% real before costs. Divide 1.08 by 1.025 and subtract one. In the projection, the 8% scenario has about $30,295 more purchasing power than the 6% scenario.

What kind of investment could earn 8%?

Over long periods, a portfolio with stock exposure can earn more than cash, but it can also lose value. Your time horizon and ability to withstand losses matter when deciding how much to put into stocks, bonds, or cash. Diversification can spread risk across investments. SEC guide to asset allocation and diversification

Look at total return, including dividends and other distributions, and account for fund fees and any taxes that apply. An advertised savings account APY and a stock portfolio’s historical annualized return describe different things. Fund expenses also reduce how much of an investment’s return you keep. SEC investor bulletin on fees and expenses

How to choose a rate for your plan

Open the 8% scenario in the compound interest calculator and rerun it at 6% and 4%. If a lower return leaves you short, try a larger monthly contribution or a later deadline. For a worked example that starts with a target, see how much to invest to reach $1 million.