Can A Mutual Fund Really Get a 12 Percent Return?

by mike on December 7, 2012

I don’t know about you, but I don’t plan on Social Security being there for my retirement.  The math just does not work.  Something major will happen in the next 35-40 years and I highly doubt it will be a good thing.  So what are you supposed to do?

The easy answer is to take matters in your own hands.  Don’t rely on the government for your well being in retirement.  My advice is to save money in good growth stock mutual funds.  That is what Mandy and I do and plan on using compound interest in our favor.

How do you know how much return to expect?  Although you can never be sure, the best way to know is to look at past performance.  Since I am talking about long term investing, it’s important to look at the long term track record of your funds.  I often tell people to find funds that have averaged 12 percent or more over their lifetime.  I often get some push-back from people telling me there is no way they can get that kind of return.  I will tell you that it definitely is possible.

Mandy and I are currently investing into 3 different mutual funds.  Here are their lifetime returns (after sales charges):

10.32 % return  1993 inception date international growth and income fund

13.16 % return   1973 inception date growth fund

12.07%  return 1973 inception date growth fund

These numbers include the huge financial downturn over the last several years.

Just to give you an idea on what these numbers mean:

If a 30 year old couple invested $300 per month into these funds ($100 in each fund) and got these same returns over the next 35 year period, they would have approximately 1.8 million dollars!

That’s right: invested $126,000 total and became $1.8 million.  If you invest this in a ROTH IRA, that growth is TAX FREE!

Bottom line: take responsibility for your retirement!  If you have 2 million dollars at retirement AND you happen to get some money from social security, I think you will forgive me for being wrong.

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