What’s a Good Return?
Can you make 100% on your money in 1 year?
Can you do it in a month?
In fact, you can do it in under 2 minutes on a roulette wheel – So why are we wasting our time here?….
When people talk ‘returns’ they’re referring to how much money they’ve made or hope to make from an investment.
If your money can earn 5% interest in a bank then you’re making a ‘5% return on your investment’.
But why do that when you can make 100% in two minutes?
Because there’s one more important element to the equation – risk. Even though you can make 100% on your money on a roulette bet you have to risk it to do so. That means you could lose it all.
So a ‘good return’ depends on the risk you need to take to get it. They call that risk to reward – what do you have to risk to get the reward?
What’s good return then?
Well…a good rule of thumb is if you’re earning more than you would in a term deposit (around 6% right now)…you’re doing OK.
But remember the real trick is to measure how risky your investments are. The higher the risk, the higher your return needs to be. The term deposit is virtually risk-free (not completely, but close) and any investment in the financial markets will be riskier. So your investment in those markets should be bringing you a better return, and if not, your money’s better in the bank.
PS. If you can make 10% every year regardless of what’s going on in the world you’re doing pretty well.
PPS. 15% each year, every year, is very handy.
PPS. 20%+ each year and your only problem is where to park the jet…
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