When it comes to investments, a good return is seen as a return that outperforms the market as a whole. ‘The market’ refers to the index that an investor is using as a benchmark for performance.
The S&P 500 is most commonly used to represent ‘the market’ and it historically delivers a return of 10% a year. Therefore, good performance is seen as a return that is above 10% in a given year.
A common misconception is that the stock market will help you to become rich quickly and that investors can double their savings in a given year. In reality, it can take a long time to make a lot of money.
In the short term, the stock market is a lot less predictable than in the long term. For that reason, it’s easier to hold investments for the long term and to not worry so much about changes in the short term.
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