What is a good return on investment?

In this article, we will discuss what constitutes a good return on investment and how it can be determined. We will divide the article into subheadings and provide a brief description for each subheading.

1. Speculative Investments

Speculative investments are considered among the highest potential return investments, but they also carry significant risks. For example, small stocks can be a good opportunity for profit, but they also carry substantial risks. The prices of small stocks can rise or fall by 80% or more in a single day based on a decision from the FDA. Gold can also be a speculative investment, as it can yield significant profits if invested at the right time, but the value of gold can continuously decline if invested at the wrong time. Therefore, investing in gold should be part of a diversified portfolio.

2. Traditional Stocks and Stock Funds

Traditional stocks and stock funds are good opportunities for achieving a good return on investment. However, it is important to understand the difference in risk levels between investing in an individual stock and investing in a stock index fund. Investment in an individual stock can result in total loss of money, while investing in a stock index fund may cause some loss, but it is difficult to lose all of the money. Safe investments like savings accounts are a secure option for investment.

3. Real Estate

Real estate is a good opportunity for achieving a good return on investment, but the investor must be experienced in this field. Investing in real estate can lead to profit, but it can also result in loss. Real estate should be invested in as part of a diversified investment strategy.

4. Traditional Bonds and Bond Funds

Traditional bonds and bond funds are considered safe and stable investments. However, it is important to understand that the value of bonds decreases when interest rates rise. This phenomenon can affect long-term bonds more than short-term bonds. If you own an individual bond and plan to hold it until maturity, those fluctuations in its value will not affect you.

5. Bitcoin

Cryptocurrencies like Bitcoin are a speculative investment. Although some people have made significant profits from their investments in Bitcoin, investing in it carries substantial risks. When the price of Bitcoin rises rapidly, the risk of losing a lot of money is greater than the chance of making a big profit. Therefore, risk management must be handled carefully when investing in Bitcoin.

6. Safe Investments

Safe investments are an option that can provide a return on investment, but they may not offer a good return on investment. Historical returns on safe investments range from 3% to 5%, but they are currently lower (0.0% to 1.0%) due to declining interest rates. This situation may drive people to invest in riskier investments in order to achieve higher returns.

What about the “Huge Return” Stories?

What about the stories we hear about people who achieved amazing returns by picking the right stock? That largely depends on luck. Some people win the lottery too, and we are happy for them, but we don’t invest all our money in lottery tickets, do we? It is ridiculous to think that it is easy to replicate good results in investing in a stock or property. It’s like winning the lottery. So, don’t follow fleeting trends and don’t invest based on luck.

These are some common investments and the expected returns for each. Investors should be realistic in their return expectations on investment and manage risks carefully. There is no perfect investment and no guaranteed return. Investment decisions should be made based on personal financial goals and each investor’s risk tolerance.

Source:
https://www.thebalancemoney.com/what-is-a-good-return-on-investment-2388458