What Is a Good Rate of Return?
Many investors hear stories of double-digit returns and wonder if they are “behind.” A better question is: what rate of return is realistic for your portfolio, your time horizon, and your comfort with risk?
Start with a Realistic Range, Not a Single Number
There is no universal “good” rate of return. It depends on:
- What you are invested in (cash, bonds, stocks, real estate, etc.).
- How long you are invested.
- How much volatility you are willing to accept.
Instead of fixating on a single number like “10% per year,” it is more useful to think in terms of a range. For example, a diversified stock-heavy portfolio might reasonably target something like a mid-single to high-single digit annual return over the long term, knowing that any single year can be far above or below that.
Different Assets, Different Expectations
Broadly speaking, lower-risk assets tend to offer lower expected returns, and vice versa.
| Asset type | Goal | Typical expectation (long term) |
|---|---|---|
| Cash / high-interest savings | Stability and liquidity | Often close to short-term interest rates |
| Government bonds | Income and lower volatility | Modest returns, generally above cash over time |
| Broad stock index funds | Long-term growth | Higher expected returns, with larger ups and downs |
These are directional examples, not guarantees. The key idea is that if you want higher potential returns, you must accept more risk and variability along the way.
Nominal vs Real Returns
When people talk about returns, they are often referring to nominal returns — the percentage gain before considering inflation. What really matters for your lifestyle, though, is the real return: your nominal return minus inflation.
For example, if your portfolio earns 6% in a year and inflation is 3%, your purchasing power has grown by roughly 3%. When you think about long-term planning, it can be helpful to work with real returns to avoid being misled by high nominal numbers during inflationary periods.
Link Your Target Return to Your Plan
A “good” return is one that allows you to reach your goals with a level of risk you can realistically tolerate. If your plan requires 15% annual returns to work, the problem is not the market — it is the plan. You may need to adjust your savings rate, timeline, or spending assumptions.
Our compound interest calculator can help you test different return assumptions. Try modelling conservative, moderate, and aggressive scenarios and see how sensitive your plan is to the return you assume.
Risk, Return, and Behaviour
Chasing very high returns often leads investors into concentrated bets or speculative assets that are difficult to hold when markets turn. A slightly lower target return, paired with a diversified asset allocation you can actually stick with, is often more effective in the real world.
In other words, a “good” return is not just about the number — it is about the path you must travel to get there and whether you can stay the course along that path.
FAQs
- Is 10% a good return?
- It can be, depending on the time period, the risk taken, and inflation. Over very short periods, 10% may not tell you much. Over long periods, consistently earning 10% would be quite strong — but it is rarely smooth or guaranteed.
- What if my portfolio is earning less than I expected?
- First, check your assumptions. Are you comparing a few years of returns to a long-term target? Markets move in cycles. You may need more time, different contributions, or a different allocation — not necessarily a higher-risk strategy.
- Where should I go next?
- Read Risk vs Return and How to Choose the Right Risk Level to connect return expectations with your day-to-day portfolio choices.