What IS a Good Return on Investment?

What IS a Good Return on Investment?

(MoneyHippo.com) – If you’re looking to grow your wealth, you may have heard experts say leaving money in the bank does not give you a good return on your investment. That might lead you to wonder: What is a good return? The truth is, the answer depends on your goals and the amount of risk you’re willing or able to take while investing your hard-earned cash. Ideally, investments should at least surpass the inflation rate because, if not, your money loses its value as time passes by. However, high-rate investments could carry too much risk for your goals.

So, the first thing you need to do is determine your money goals and see what rate of return is acceptable to you.

Leaving your savings in the bank will net you less than 1% in most cases. While your money has FDIC backing up to a certain amount, the growth rate is too low for most people. If you still want to keep your money safe but earn a bit more of a return, you could look into government bonds, certificates of deposit, or treasury bills. Those investments could give you a 1% to 4% rate of return and come with little or low risk.

That rate of return might not be enough to reach your goals, prompting you to look into other avenues for investments in the market. Bond funds and stocks could earn you a 5% to 10% return or more, but they come with substantial risk, and no entity guarantees them. 

The bottom line is a good return on investment is the percentage that matches your goals and acceptable risk tolerance.

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