ValueWalk: How Much Can You Rally Expect to Earn Investing?
Why do we invest? At its core, we’re looking to have our saved money earn more money for us. Over the course of a lifetime, investing can lead to excellent results.
However, expectations for future returns can wildly change in the middle of either a bull or bear market. Keeping a grounded approach can ensure that investors don’t get too caught up in market fear… or hype.
Realistically, investors may want to start by looking at some of the best performers of all time. Warren Buffett has managed to return about 20 percent annualized over decades.
That’s significantly better than the returns of the stock market’s average of about 9 percent. But it’s also far smaller than the short-term returns on risky stocks like a hot tech name or a cryptocurrency play that takes off.
Investors can certainly make speculative investments that can be big winners. But by looking at total portfolio returns, investors can get a realistic view of sustained success over the course of decades.
Looking to make Buffett-like returns of 15-20 percent consistently year-in, year-out, will lead to massive returns. That’s thanks to the power of compounding.
Investors who simply follow the S&P 500 can earn about two-thirds of the returns of a great investor with nearly no cost and no work. Most investors fail to meet those returns, usually from trying to chase big short-term gains.