What is a realistic percentage I should make a year on investments?
The old 10% over the long haul does not seem to be true anymore. I’m not interested in day trading, options, forex or other higher risk money vehicles. I’m more interested in stocks and bonds investing without a lot of trading going on.
August 3rd, 2010 at 7:24 pm
The best guide I’ve used for a long time is the long term yield on the risk free 10 years treasury note plus 2% -3%. Right now, approximately 6%.
August 3rd, 2010 at 7:43 pm
There was an article on that on the internet just a couple of days ago. Investment gurus were polled and the consensus was about 2% after inflation at the most. Some–a small majority–stuck to the 10%. A few pessimists came in at zero. If the last 10 years is any indication, one is going to have to think outside the box, to get 2%. Let’s face it. There is every indication that the growth years are done and gone as a rule of thumb. The US economy appears pretty well headed the way the Roman empire went. The Roman empire had Nero. We had Bush and now Obama. The Roman empire had its senate and we have ours. A lot of parallels here.
August 3rd, 2010 at 8:03 pm
Are you a long-term Buy & Hold investor? Or maybe do you trade the long-term trend, maybe 3-5 trades per year with the trend? If the latter, you may see the Uptrend broken in the next few days, and act accordingly. If the long-term trend is down, like 2008, there is no sane reason to own stocks.
Realistically, your question may become “What is a realstic percentage I should lose in a year?” The markets go both ways, and we cannot afford to presume only one.
What is your definition of Long-Term? If you had bought anywhere around the 2000 high in the stock market, you would still be waiting to get even after ten years, and wouldn’t mind waiting another seven years to make a profit if you are truly a “long-term” investor.
The “Buy-and-Hold” strategy, or what some people call “Buy-and-Hope” strategy, really doesn’t hold water if you consider it depends on when you “buy.” You might go 25 years without a profit, if history is any guide. But if that is your deal, then go for it.
For most people, the name of the game is capital preservation. You don’t invest when the market gets too risky or too frothy or is nearing a market top or an old market top, or when the market is overpriced, or unstable, and all of these things are true today. There really is a time when cash is King. That 1.5% CD is going to look pretty good when everyone else is cryin’ in their beer about losses. Or the market could just go sideways to work off the excesses, but either way, you’re safe if you’re out. Wanna throw the dice, go to Vegas.
If you wish to research the “Buy and Hold Strategy” further, or perhaps trade yourself, I recommend two book titles. One is called “Which Is Better, Buy-and-Hold or Market Timing?” The other is “Do You Have What It Takes to Be a Market Timer?” They will give you plenty to think about.
I think the day of Buy & Hold is over. These are different times because it is no longer a free market, but rather a gov’t controlled market. We are witnessing a new phenomena called the .gov bubble. That is not something I feel comfortable “investing” in. Maybe I’m wrong, but I don’t think you can regulate your way out of a financial Armageddon. What they’ve done, is simply delay it.
August 3rd, 2010 at 8:57 pm
The stock market has averaged a little less than 10% a year since 1926, but that is only an average. As this chart shows, there have been decades of negative returns, and other decades of 17% returns. If you invest for a decade, you can expect a return of from -5% to 21% a year. If you invest for 30 years, you can expect a return of around 7% to 12% a year. The longer you invest for, the closer you are likely to come to the magical 10% number, but it is really only a very rough guess.
Many people are trying to give you a very precise answer of how the market with do over the next decade. That is absurd. The more you study the market, the more you realize how unpredictable it is. You have to give a very broad range estimate for what the market will do.
August 3rd, 2010 at 9:51 pm
The stock prices in today’s market is giving long term investors a good opportunity to enter. If you are interested in staying invested for next 5 years, then you can easily expect returns like 7-8%.