- Michael DiBartolomeo
Is a 6% Rate of Return Good?
Updated: Feb 24, 2022
Although the world of finance and economy is complicated to understand, so many people ask ‘is a 6% rate of return good?’. Overall, to have positive outcomes, clients must take different things into account. This article considers the basics of it, and how everyone can get the results they want.
How Experts Calculate a Six Percent Rate of Return
Getting a six percent rate of return is fantastic in many cases, but not everyone can achieve it. People must consider different factors, which are as follows:
Since 1924, the average inflation has been almost three percent. However, calculating future rates is ideal if someone wants high return rates.
Unlike other areas, the economy and finance world vary a lot depending on many different factors. Therefore, some people assume lower inflation, especially because developed countries’ rates usually don't change as much.
The typical estimate for inflation depends on the country and it also considers many other different factors, which is why hiring professionals to help is essential. Experts at Kelley Financial Group can help clients and explain everything they need to know, including all about inflation.
They Predict the Real Return
Once the person assumes the inflation rate, they can calculate the real return based on that number. However, if they don't have any experience on the matter, doing the calculations might be hard.
Each case is completely different since it depends on the person’s assets, like checking accounts. Consequently, many people prefer hiring financial advisors during this stage since they can help them determine what they want to know.
Professionals Expect Several Aspects Rise
When someone is calculating their rate of return, they must consider various things, for example, what they invest in. Each type of investment could have different outcomes depending on the person's choices, which is why all cases are different.
Some investments may be successful and could rise if they are at the bottom of an interest cycle and they are supposed to go up in the following years. Nonetheless, others may not be so beneficial for the client.
To make matters worse, just because investments are expected to rise doesn't mean it's going to happen. Thus, calculations can be very challenging, especially for someone without experience in the matter.
Financial advisors, however, are professionals prepared to manage all aspects of someone's assets. They can evaluate their investments, recommend beneficial options, and help them shape their path, so they achieve the future they want.
In many cases, advisors expect several types of investments to rise, such as bonds. Once they do that, they choose a specific percentage to make their calculations.
Equities Rise Less
Even though financial advisors expect bonds to rise, they often don't believe the same might happen with equities, which is why hiring a professional is so important. Each case and investment type is entirely different, and getting a six percent return rate is not possible unless the client makes the best choices.
Depending on the country, equities might rise less than bonds, especially if experts expect a slow economy. Even so, many other factors can influence that as well. Thus, financial advisors often assess each one of them before suggesting alternatives to their clients.
The main difference between a financial advisor and a regular person is that a skilled financial advisor is a certified expert who can assess risks and benefits to make good decisions. Therefore, they can evaluate all the factors that investment entails, and help the client understand if it's convenient or not.
After considering all the previously mentioned factors, experts usually add inflation rates and rebalance the numbers, hence getting a six percent rate of return.
Although it seems like a straightforward process, when people try to practice it, they might notice that it's much more challenging than it appears. However, hiring professionals at Kelley Financial Group could help since they're experienced experts who can help clients assess their alternatives and make the best financial choices.
Having a high return rate is beneficial for the client, but it's impossible unless they know how to decide and invest correctly. Thus, hiring a financial advisor might be a fantastic idea.
People who wonder ‘is a 6% rate of return good?’ often already know that it's very beneficial for many clients. Nonetheless, it's not easy to get, which is why hiring a financial advisor is always the best option.