Your Investment Summary
Final Balance:
Total Invested:
Total Growth:
Growth Percentage:
$1,764,957
$180,000
$1,584,957
880.5%
Investment Education Center
Dave Ramsey’s 12% Rule is a guideline used to estimate long-term investment growth by assuming an average annual return of 12%. It's commonly used for retirement planning and compound-interest projections, especially when modeling stock-based investments over decades. Remember, 12% is an assumption, not a guarantee. Actual returns vary year to year, and factors like inflation, taxes, and fees can reduce real results. That's why many investors test multiple scenarios like 6%, 8%, 10%, and 12% to understand a range of possible outcomes.
Compound interest is the eighth wonder of the world! It's when your money earns returns… and then those returns earn returns too. It's “interest on interest,” which creates a snowball effect over time. In the early years, growth looks slow. Later, it can accelerate because your “base” keeps getting bigger. However, real investing returns aren't smooth. Markets go up and down. Compounding still works, but only if you stay invested and don't interrupt the process. Start contributions as soon as possible, automate them, and remember: time in the market is more beneficial than timing the market.
Sometimes but it's not guaranteed. Historically, U.S. stocks have delivered strong long-term returns, and certain periods have averaged near 12% before inflation, taxes, and fees. In real life, returns vary year to year. Many investors experience results closer to 7 – 10% over long periods, depending on their strategy and market conditions. Assuming 12% every year can overstate future balances and underestimate risk. Use 12% as an optimistic scenario, but compare it with more conservative assumptions to plan with confidence.