Best Investments for Beginners

What are Stock Market Returns?

Stock Market returns have everything to do with how much money you make in the stock market. When you invest in stocks, you are doing so hoping and expecting to earn a profit. You’ll buy a certain amount of stock for a certain amount of money and hope to one day sell it for a higher amount of money. This is equal to your Stock market returns.

If you buy a stock for $50 and then you sell the stock four years later for $70, you have made a profit of $20. Your rate of return is equal to the profit divided by your original investment. This is $20 divided by $50. Your rate of return is 40%. Your annual rate of return is 10% per year.

This is a very good return on the stock market. The average historical annual rate of return is about 10 to 13% per year. If you can earn this, you can be sure you are earning about the average. Some years, such as in recessions or low market times, you will not be able to make this average. Other years, the markets may be doing extremely well and you can make a lot more. That is why it is a historical average over many years.

You need to keep in mind the times and where the market is as a whole to gauge how this well you are doing compared to the market. Using stock indexes like the Dow Jones industrial average and the S&P 500 are a great way to see how well you’re doing as a whole. They can show you the average the market is doing and you can compare yourself to that.

How to Increase your Stock Market Returns

If you feel that your stock market returns are not very high and they could be higher, there are ways to increase it. Basically, you need to know everything you can about not only how to invest in stocks, but the corporations your invested in. Proper prior research is important for a strong portfolio. Don’t invest in something because a friend told you is was a great investment or because it’s a popular stock without doing proper research.

Research should include several hours of fundamental analysis. You should be looking at financial statements, following ratios, and comparing it all to your own basic standards to decide if it is a good investment. Also, if you can,  choose to buy and only sell when you feel it’s at its peak price and should be sold.

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