What is a good Rate of Return on investments (ROI)?

Short Answer

A good return on investment is where a person makes considerable profits form their investments after a long period. However, the profits can vary form one person to another.

Detailed Answer

  • How one can achieve 15% assured return every year by investing 5 lakhs?
  • Can you earn at least Rs. 70 - 80 k per month with share trading and investing on a capital of Rs.5 lakh?
  • How can I invest 3.5 lac for 15 years for getting around 10% return post all broker charges?

Essentially all these questions are variant of one question: What is a good Rate of Return on investments (ROI)?

Defining Good Return on Investment

What is a good return is something which varies from person to person, for some folks 10% is a good return for some folks 15% also seems less, but is their an independent way we can define good returns well let's look at some data , below is 30 year return data from SENSEX , in this time SENSEX returned around.

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So in little over 30 years sensex grew almost 60 times, thus giving us a CAGR of 14.57% approximately .

So we have one benchmark from the stock market over reasonably long terms of 14.57%

Now lets look at other possible benchmarks, if you put all this money in Fixed deposits your annual rate will be in the range of 7-7.5% so that's a reasonable risk free benchmark, though there is a tax deduction at source so your actual returns will be far lesser than the benchmark interest rates.

Beyond financial instruments there are non-financial instruments or options like investing in real estate which can provide good returns, while we do not have good data on Real estate returns in India.

I hope that this made sense and gives oneself perspective of future returns to expect.

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