What is a Good Return on Investment?

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When investing, your prime objective is to make more money. Similarly, investors look for making a profit as much as they can. That makes it essential for anyone to have some idea about the return he or she can expect before making any investments.

The amount of profit or return an investment generates concerning its costs is measured by the profitability ratio called return on investment (ROI). Calculated as a percentage, ROI is very helpful for assessing opportunities for specific or individual investments. What makes a good ROI?

What Is a Good Rate of Return on Investment (ROI)?

You do not have an answer to what a good ROI is. To determine a good ROI, you need to regard various factors. Your financial need is the most crucial factor to consider when calculating a good ROI. For instance, if your purpose of investing is to pay for the marriage expenses of your daughter, a good ROI, for you will be the one that allows your ongoing investments to grow enough to meet your daughter’s marriage expenses 25 years later on.

Likewise, a young couple’s or a retired couple’s good ROI will be different. A young couple may want their investments to give the returns to pay off their child’s education expenses or buy a new home. A retired couple would define a good rate of return as one that produces enough recurring income to support them comfortably.

Nevertheless, it is crucial to consider the type of investment you choose to calculate a good ROI. Of course, you can find the Best stock market app to set your goals and make planned investments to achieve them.

Is an average annual return of 8-10% a good one?

When it comes to investing in government bonds, the answer is 8% is a good ROI, for government bonds are less risky than stocks. However, most investors of small-cap stocks may not consider an average annual ROI of 8% to be a good ROI for money invested in those stocks over an extended period as they are risky.

For long-term stock market investments, the majority of investors would consider an average annual ROI of 10% or higher to be a good ROI. There will be years with lower returns, possibly even negative returns. There will be a lot higher returns in other years.

Though a good ROI is one metric to make investment decisions, it is essential to find the best stock market app to help you have a diversified portfolio that offers higher returns.