Investment Tidbit 4
An informed investor needs to establish his or her personal expected reasonable growth rate of return.
The general rule of thumb is that if you take the percentage
of decline tolerance (how much money you could stand to lose) in a given quarter that you are comfortable with, divide that percentage in half, and add a money market rate (typically 1 to 2 percent), the result is a reasonable rate of growth over a ten year period.
How little or how much risk you take directly affects how much growth you can expect. If you, for example, are willing to take a 10 percent decline quarterly, divide that number in half (5 percent), and add 1 to 2 percent. A reasonable rate of growth that you can expect to capture is 6 or 7 percent annually over a three to five year period.
It is important to know, and remember, that there will be some times when you will experience declines in excess of this amount and your returns might be more at other times.
For more information on investing, contact Rogers Wealth Group.