I think making the claim that a 12% ROI is possible from an equity fund is dangerous. After all, the index funds I bought a decade ago are still hovering around the break even point, much less generating a double digit return.

The only way I can see a 12% return is if you were lucky to start investing at the beginning of a stock market supercycle (not a commonly used term), and were lucky to get out 15 to 20 years later with a move to fixed income.

Personally, I use an 8% ROI. It's not a doom & gloom type number predicting a 30 year bear market, but also doesn't forecast a period of irrational exuberance. Plus, if I'm wrong and underestimate, anything above 8% is just gravy.

In most of my scenarios that need a Rate of Return, I usually use 6%. I feel over a long period of time, that is doable in the stock market, but stress that the returns can vary greatly year to year. That number is not too far from the long-term bond market rate of return as well, so I think most can use that to plug into their formulas.

If the return is greater, then no harm, it is only when you plan on more (such as the 12% thrown about) and don't get it, then your best laid plans can turn to dust (or your gold to fool's gold) before your very eyes....

A 12% rate of return or greater is what a good mutual fund will give over a long period of time, 20 years or more. If you have average mutual funds, then you will get average returns. I have three mutual funds that been around 25 years or more and have averaged greater than 12% per year since their inception. This data includes the current recession and several more before it. Researching good mutual funds to invest in is key to not only equaling the stock market average, but even beating it.