Good growth stock mutual funds have historically returned 12 percent
Contradicted As a statement about what investors historically earned, the 12 percent figure is contradicted by the data: the S&P 500's compounded total return from 1928 through 2025 is about 10 percent nominal, roughly 7 percent after inflation, and no mutual fund fee is included in the 11.86 percent figure. The claim mixes a true arithmetic average with the implication that it is what compounding delivers.
Show 5 supporting points
- The 11.86 percent figure is the arithmetic mean of annual returns. Compounding that series yields about 10 percent annualized since 1926, the gap between average and compound being the volatility penalty.
- The S&P 500 compounded at about 10 percent nominal per year from 1928 through 2025, and roughly 6.7 percent after inflation.
- Fees are absent: a 0.75 percent expense ratio on a growth fund reduces the compounded return by roughly a quarter to a third of the claimed advantage.
- Ramsey's own page concedes the "Lost Decade": the 2000-2009 window averaged about 1 percent annually.
- The page's own 30-year windows undercut the headline: 1981-2010 at 12.08 percent, 1986-2015 at 11.73 percent, 1996-2025 at 11.80 percent. Those are arithmetic averages again, and two of the three sit below 12.
The historical average annual return from 1928 through 2025 is 11.86%. … there are mutual funds out there that have averaged 12% annual returns (and more) over the course of their history.
These are the two sentences that carry the 12 percent claim on Ramsey Solutions' own explainer, "Can You Really Get a 12% Return on Your Investments?". Dating it takes some care, because the page disagrees with itself: the visible byline reads "PUBLISHED: DEC 9, 2020" and "LAST UPDATED: FEB 5, 2026", while the structured data gives datePublished 2024-02-22 and dateModified 2026-02-05. The two agree on the revision and disagree on the original, so JMM dates the claim to the revision: the only date both records support, and the one consistent with a 1928 through 2025 return window that could not have been written before 2026. It is attributed to Ramsey Solutions, the company page arguing for its founder's number, rather than putting a synthesized first-person sentence in Dave Ramsey's mouth. The 11.86 percent is the arithmetic mean of annual returns, not the compound return investors actually earn.
What happened, dated
Every entry carries the date and the record behind it. Sources are indexed against the register below.
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Series start
The long-run S&P 500 total-return series begins; the compounded rate through 2025 is about 10 percent nominal. Source 5
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First major critique
The New York Times "Dave Ramsey's 12% Solution" explains the arithmetic-versus-compound gap. Source 2
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Withdrawal rule critique
The Motley Fool shows the 8 percent withdrawal rule implied by 12 percent returns can exhaust a portfolio by age 90. Source 4
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Current page
The explainer is revised to the 1928-2025 average of 11.86 percent, three 30-year windows, and the Lost Decade caveat. Verified live August 6, 2026. Source 1
What the evidence shows
Average is not compounded
This is the entire dispute in one sentence. The 11.86 percent arithmetic mean describes a series that actually compounded at about 10 percent, because losses are deducted from a smaller base and gains are applied to a bigger one. The claim presents the mean as the experience, and the experience is what planning math needs.
Fees make it worse
The 11.86 percent has no fee inside it. A typical growth fund charges near 0.75 percent a year, and after fees a 20-year investor holding "good growth stock mutual funds" ends with materially less than the 12 percent path implies. The claim's own building block, an index average, is the best case, not the fund case.
What 12 percent would require
Sustained 12 percent compounding means roughly doubling every six years. It happened for specific decades, the 1950s, the 1990s, and 2010-2019 came close, and it never persisted as an average. The audit's verdict is about the historical claim, and the planning lesson is separate: plan at 10 percent nominal and let a good decade be a bonus.
Every receipt, with retrieval dates
JMM attaches a statement only when the contemporaneous primary record and an exact locator exist. Retrieved dates are when JMM last verified each link.
Evidence strength: Quoted from the primary record. The statement source, a second publisher, and an official series are all in the register below.
Visible byline "PUBLISHED: DEC 9, 2020 / LAST UPDATED: FEB 5, 2026"; structured data datePublished 2024-02-22, dateModified 2026-02-05; verified live 2026-08-06. "The historical average annual return from 1928 through 2025 is 11.86%"; the 30-year windows 1981-2010 at 12.08%, 1986-2015 at 11.73% and 1996-2025 at 11.80%; and "there are mutual funds out there that have averaged 12% annual returns (and more) over the course of their history"
Arithmetic average versus compound return explanation
Fund track record data and planning assumptions
8 percent withdrawal rule analysis and 10 percent compound return
Annual U.S. returns and cumulative value of $100 invested at the start of 1928; the S&P 500 column explicitly includes dividends and runs through 2025