Comment on When investing your money, what is considered a good rate of return?
sosodev@lemmy.world 7 months ago
It depends on the risk involved. The US stock market has returned around 7% annually averaged over a very long period of time. That’s considered the benchmark for investments with significant risk.
Tehhund@lemmy.world 7 months ago
True, but it’s worth noting that this is an average and will vary wildly. Since I started tracking my annual returns have been 9.42%, 1.12%, 8.44%, 17.28%, -5.30%, 22.04%, 18.75%, 15.60%, -17.58%, and 18.11%. Which averages out to 7.75% — not far from the usual 7% figure.*
So for anyone just learning about investing, you’ll almost never have an “average” year. Each year will be all over the place. It’s only when you’ve been in the market for a long time that your returns will average out to something close to typical.
*I’m also ignoring an important distinction: IIRC the stock market averages close to 10% returns if you only look at dollar values. But when you account for the fact that inflation makes reach dollar worth less, on average returns are 7% in terms of real purchasing power. The returns I posted above are not inflation adjusted, but they include some bonds which don’t return as much as stocks. So it’s no surprise that my returns are on average less than 10%.