What is a Good Return on Investment or ROI?
My answer to this may sound a bit generic but that’s really not the intent. This varies drastically from person to person and also depends on an individual’s risk tolerance and personal investment philosophy. For me, it really depends on the terms of the deal:
- How long is my money going to be tied up? I am going to want a higher % if it is longer in duration because interest rates may rise.
- How much money am I tying up? – This can impact the return I’m looking for as well.
- What is the level of risk? – Obviously the higher the risk, a higher return should be expected.
I have found that some people are ecstatic to make 5% on their money based on what the bank products are currently providing. On the other hand, if interest rates rise and the investor is locked into a deal long term, it’s no longer a very appealing investment. Generally, what I do with my clients is determine what return they are looking for and then search for the product that is going to meet that expectation.