There is constant noise in the industry around this question. For every person who wants to know what a good return is, there are ten others with opinions on how their returns could and should be higher, what to do and what not to do, when to buy and when to sell, and how to “beat the market.”
Most of the time, all this does is create an environment of uncertainty and anxiety for the investor. Participating in the markets becomes an emotional experience, and instead of seeing higher returns, you’re more likely to make decisions that are detrimental to your portfolio and your financial wellbeing.
A Logical Framework
It’s far better to get out of this environment completely, and to build up a logical framework for your investment objectives — a framework that enables you to make rational decisions to the benefit of your personal goals.
Instead of asking “What is a good return?” ask yourself:
“How much do I have?”
“How much do I need?”
“When do I need it?”
“What do I need it for?”
If you can answer these questions in the context of a financial plan, you can define the type of returns needed over the short and long term, as well as the levels of risk appropriate for your situation. Instead of being at the mercy of the markets, you can take advantage of opportunities over the long term, where wealth creation happens.
A good return is what allows you to get what you need regardless of what’s happening in the markets.