Understanding the concept of return on investment (ROI) is the first step to possibly generating a 10%+ return. Keep in mind, however, that a 10%+ ROI is not a guaranteed result. ROI is a financial metric widely used to measure the possibility of gaining a return from an investment based on its past performance. It is calculated by subtracting the cost of investment from the current value of investment, then dividing it by the cost of investment. The right investment choices to achieve that type of return will depend on a number of factors such as the current conditions of the market. Navigating these calculations and investment choices can be complex, which is where consulting a professional financial advisor can be particularly helpful.
What Is Your Return on Investment?
Calculating ROI involves determining the gain from your investment relative to the cost of your investment. Let’s simplify it with an example. Assume you invested $1,500 in a venture and later, it’s worth $1,650. Your ROI is then ($1,650 – $1,500) / $1,500 = 10%. Regularly tracking your ROI can be made easier with digital tools or even the assistance of a financial advisor. They serve crucial roles in assessing the efficiency of your investment and comparing the ROI against the ROI of other investments.
Investments That Can Potentially Return 10% or More
Investing money wisely is a skill set that isn’t just reserved for Wall Street tycoons. With the right knowledge and strategies or the guidance of a skilled financial advisor, anyone can make strides to unlock their wealth potential and aim for a 10% return on investment. Various investment options might yield a 10%+ return. Nevertheless, it’s important to proceed with caution because past returns are not indicative of future results.
Stocks are a popular choice for many investors. For example, Apple’s stock has returned more than 898% over the past decade even if it is a bit of a unicorn stock. Investment decisions like this should be based on one’s risk tolerance, considering all factors involved. Here are some investments that have, cumulatively, returned 10% or more in the past:
- Stocks
- Real Estate
- Private Credit
- Junk Bonds
- Index Funds
- Buying a Business
- High-End Art or Other Collectables
None of these investments return 10%+ at all times so it’s important to check with a professional on what investments might help you best achieve your goals.
Diversifying Your Portfolio to Reach a 10% Return
Diversification is a risk management strategy that encompasses a wide variety of investments within a portfolio to potentially achieve higher returns with lower risk. A diverse portfolio could consist of 30% in a mix of value and growth stocks, 30% in index funds, 20% in bonds, 10% in real estate and 10% in alternative investments like P2P lending or commodities. However, diversification can have nearly unlimited combinations in an effort to reach your goals.
The benefits of diversification come in the balance of catching nice returns when certain investments take off while spreading your risk out as well. If one type of investment drops your entire portfolio won’t take a hit and you’ll be able to take advantage of potential strong returns with other assets. This way if one asset is returning 15% but another drops to only a 2% return, it’s still possible for your entire portfolio to reach a steady 10%+ return.
Bottom Line
Investing is a financial strategy that possibly can lead to substantial wealth if done correctly. Nevertheless, it’s not a guaranteed path to riches and it requires care, patience, regular reviews and possible adjustments over time. By understanding the concept of ROI, identifying potentially lucrative investment options, diversifying your portfolio and regularly checking your investments, it’s possible to unlock your wealth potential and strive for that 10%+ return on investment. Making use of professional advice from financial advisors can be beneficial in achieving your desired returns as well.
Tips for Investing
- It can be difficult to find the right investments to meet your overall financial needs, especially if you’re not an experienced professional. With the help of a financial advisor, you can find the right balance in your portfolio to aim for a 10% return over time. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You can use SmartAsset’s free asset allocation calculator to see what your portfolio might look like with your chosen risk profile.
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