FT MarketWatch

What Is a Good Return on Investment?

Written by Greg, founder of FTMarketWatch — a former licensed commodities trader, self-directed investor since. Not a licensed financial advisor.

Short answer: There is no single number that defines a “good” return — it depends on the type of investment, the risk taken to earn it, and the time period involved. As a rough historical reference point, U.S. large-cap stocks have averaged roughly 9–10% a year before inflation over many decades, but that average hides huge year-to-year swings, including sharp losses.

Detailed Explanation

A “good” return only means something when it's compared against something else: the risk you took to earn it, inflation, fees, and a relevant benchmark. A 4% return with almost no risk (like a savings account or short-term government bond) and a 4% return from a volatile individual stock are not equally good outcomes.

The most common benchmark for U.S. stock returns is a broad index like the S&P 500. If an actively managed fund or a stock picker returns less than a comparable index fund over the long run, after fees, that's generally considered a weak result relative to the risk taken.

Historical long-run averages are useful for setting expectations, but they are not a promise. Any given year, or even decade, can look very different from the long-run average, and past performance does not guarantee future results.

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