The 12 Percent Rule
Aim for 12% returns
The 12 Percent Rule is a framework for investing that aims to achieve a 12% rate of return over the long term. This rule is based on the historical averages of the Standard & Poor's 500 index, which has averaged 11.59% per year for the last 90 years. The rule is not a guarantee, but rather a guideline for investors to aim for. It's essential to note that the market can be volatile, and returns may vary from year to year.
- Aim for long-term returns, not short-term gains.
- Invest in a diversified portfolio to minimize risk.
- Avoid getting caught up in market volatility and stay focused on the long-term goal.
- Set a long-term investment goalDetermine what you want to achieve through investing, such as retirement or a down payment on a house.Pro tipConsider working with a financial advisor to create a personalized investment plan.WarningAvoid setting unrealistic expectations or getting caught up in get-rich-quick schemes.
- Choose a diversified investment portfolioSelect a mix of low-risk and higher-risk investments to balance potential returns with risk tolerance.Pro tipConsider investing in index funds or ETFs to track the market as a whole.WarningAvoid putting all your eggs in one basket or investing in a single stock or sector.
- Monitor and adjust your portfolioRegularly review your investment portfolio to ensure it remains aligned with your goals and risk tolerance.Pro tipConsider rebalancing your portfolio periodically to maintain an optimal asset allocation.WarningAvoid making emotional decisions based on short-term market fluctuations.
Dave Ramsey has personally invested in growth and income stock mutual funds that have averaged 12% or more per year over the long term.
The S&P 500 has averaged 11.59% per year for the last 90 years, demonstrating the potential for long-term returns.
The 12 Percent Rule is based on the historical performance of the S&P 500 index. Dave Ramsey, the author, has personally invested in growth and income stock mutual funds that have averaged 12% or more per year over the long term.