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What rate of return should I expect on my stocks?The topic of this article is the answer to the following question: What rate of return should I expect on my stocks? The rate of return you should expect on your stocks is a complicated question, and there is no one pat answer that will tell you what you should expect from all of your stocks.You buy different stocks for different reasons, and everybody has their own investment style that will allow them to accept different rates of returns.It's pretty easy to find the expected rate of return on a stock-all that you need to do is look up a stock analyst's report on the company that you're considering investing in.Make sure that you do your research on the company to make sure that it's the kind of company that you want to invest in, but along with your research, you will come across the expert-predicted expected rate of return.
However, even when you have calculated or found your expected rate of return on your stocks, you still have to factor in risk.Essentially, risk is the chance that you are taking that you will not achieve that expected return on your stocks.You can calculate your expected rate of return, but once risk is factored in, then chances are that your actual rate of return is actually much lower than your expected rate of return.You choose stocks based not only on what rate of return you would like, but also on how much risk you are willing to take.Generally speaking, the higher the risk of a stock, the higher expected potential rate of return.This means that if the stock plays out the way that it is expected to, you will get a higher rate of return that a number of other stocks.However, you are also gambling more with these high-yield stocks, because they have much more risk that they will not, in fact, yield your expected rate of return.If you don't want to take so much risk, or you are a conservative investor, then you should invest in stocks that post a lower expected rate of return because they have less risk. |
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