Average Return on Investment in Stocks is High?

What you should do if the average return on investment in stocks is high? I can get as high as 15% earned interest in stock market investing. Sometimes I surpassed the 25% per year. My question is, should I put all my money in the stock market?

InvestmentTotal.com Answer: You need to study asset allocation. Asset allocation means the way you distribute your investment funds to every investment vehicle. If you have money from stocks, make sure you have also funds in bonds, savings, mutual funds money market fund type, ETFs, etc.

Stock market investing is obviously can get a high return on investment (ROI). It is true that the higher the risk, the higher the rewards that investors can get. In investing, high risk is equal to high returns. Sometimes, that statement was “wrong” But, most of the time it’s right.

High ROI in Stocks and Expert’s Advice

Trent Hamm of TheSimpleDollar.com suggested 7% annual return ^{1 (see references)}. On May 3, 2004, Bloomberg.com said, “Investors in U.S. stocks should expect a return of about 6 percent to 7 percent” ^{2 (not available)}

Would you invest 1,000,000 dollars just to get 1,000 dollars a year? Probably not! Many investors are giving us advice about “profitable but not too risky investing strategies”.

The next question is, if stock market is risky but profitable, would you focus only in investing in stocks?

Answer: No, in personal finance and investing, the “asset allocation strategies” is very important in order for you (the investors) will minimize the loss of capital when stock market crashes or fall down.

If You Get High Return on Stocks

Asset allocation and diversification are twins. If you have funds in stocks and suddenly the market crash, what would you think about your investments? They will also suddenly disappear. But, if aside from stocks, you have investment funds in other types of investment vehicle such as bonds, real estate and business ownership, you can recover the loss from stocks.

Related: Which Investments Can Give High Return?

References:

¹ Average Stock Market Return: Where Does 7% Come From?

² http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1.neDMy8DEU

What do you think about the average return on investment in stocks? Is the ROI high if you can get 5%, 7%, 12%, 15% 20% 30% 50% or more? Please share your thoughts and opinions. I will highly appreciate your comments. Share this article with your friends and to your fellow investors.