When it comes to typical growth rates, the investment community usually considers something in the 6% to 10% range to be reasonable in the long run. This is a starting point for investors to get an idea of possible investments. Most investors would consider an average annual rate of return of 10% or more to be a good return on investment (ROI) for long-term investments in the stock market. However, it is important to remember that this is an average and some years may generate lower returns, or even negative ones, while other years may generate significantly higher returns.
Buying and holding investments is one of the easiest strategies for achieving growth and, over time, it can also be one of the most effective. Investors who simply buy stocks or other growing investments and keep them in their portfolios with only minimal follow-up are often pleasantly surprised by the results. If an individual investor can achieve returns on their investments that exceed the average investor's long-term average of about 5.5%, they are doing quite well. By focusing investments on index funds, investors can be close to matching their returns.
If the long-term market average is 10%, investors may be able to achieve a long-term return of 8 or 9%, which is highly desirable. The average return on the stock market has been around 10% per annum for almost the past century. The S&P 500 is often considered the reference measure for annual stock market performance. Although 10% is the average return on the stock market, returns for any year are far from the average.
CD rate data comes from Bankrate's internal averages. Growing stocks can be risky because investors often pay a lot for shares relative to the company's profits. Therefore, when a bear market or a recession hits, these stocks can lose a lot of value very quickly. It's as if their popularity suddenly disappeared in an instant.
However, growing stocks have had some of the best results over time.Robo-advisors are another great alternative if you don't want to invest a lot and prefer to leave everything in the hands of an experienced professional. With a robo-advisor, you'll simply deposit money into the robotic account and it will automatically invest it based on your objectives, your time horizon and your risk tolerance. You'll complete some questionnaires when you start so that the robo-advisor understands what you need from the service and then manages the entire process. The robo-advisor will select the funds, usually low-cost ETFs, and create a portfolio for you.If you look at the real return on your portfolio as the years go by (times not adjusted for inflation), then between 6.6% and 8.4% is a realistic rate of return.
This rate of return is highly desirable and achievable with minimal effort if you focus your investments on index funds and use a robo-advisor.
