What Is Considered a Good Investment Return Rate?


Quick Answer

An appropriate rate of return on an investment is dependent on an individual's risk tolerance, with investments with more variable performance generally expected to provide higher rates of return, according to Investopedia. However, one method of comparison is to assess performance relative to overall market returns of approximately 10 percent.

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Full Answer

Many investors consider the Standard & Poor's 500 index to be a proxy for the overall market because of the size and significance of the corporations that comprise it, explains Investopedia. The index's annualized return over its near 100-year history has been approximately 10 percent, or 7 percent when adjusted for inflation. If an investment or portfolio of investments is no more risky than the market as a whole, then this may be an appropriate benchmark.

However, because of the fees involved in many types of investments, such as mutual funds, actual performance of risk-neutral investments is often as much as 2 to 3 percent lower than this figure, notes the Financial Post.

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