What is the average rate of return on stocks, adjusted for inflation?

The average rate of return on stocks, adjusted for inflation, is generally considered to be around 7%. This figure takes into account the historical performance of stock markets over long periods, where nominal returns may appear higher. However, after adjusting for the effects of inflation, which erodes purchasing power, the real return that an investor can expect averages around this rate.

The 7% figure incorporates the overall trends observed in stock markets, considering both periods of growth and downturns. It reflects a conservative estimate that accounts for inflationary impacts and helps investors plan for future earnings based on historical data. Understanding this average is crucial for setting realistic investment goals and expectations, as it paints a more accurate picture of potential investment growth over time than nominal rates.