It’s important for investors to have realistic expectations about what type of return they’ll see. A good return on investment is generally considered to be about 7% per year. This is the barometer that investors often use based off the historical average return of the S&P 500 after adjusting for inflation.

What returns do investors expect?

In general, angel investors expect to get their money back within 5 to 7 years with an annualized internal rate of return (“IRR”) of 20% to 40%. Venture capital funds strive for the higher end of this range or more. So how big does a company have to grow to in order to achieve a venture-friendly rate of return?

What kind of rate of return should I expect from my investments?

A rate of return of 7% will double your money in just over 10 years (72 / 7 = 10.29). Compare that with a lower rate of return, such as the 3% annual average historical returns from bonds, which would take about 24 years to double your initial investment–more than twice as long. Keep in mind that the Rule of 72 is not an exact calculation.

What kind of returns can I expect from venture investing?

Venture investment as an asset class can yield very favorable returns, but like any other investment, returns are never guaranteed and venture investing is best done when using a portfolio approach. There are a few ways to deploy capital in venture investments; via funds, syndicates, or direct investments.

What should you expect to earn on your investment?

So in a nutshell, my opinion is that you would be fortunate to average around 7-8% rate of return over a long-term basis. There will be periods in which you get a 20% rate of return.

What should be included in average stock market return?

What’s missing from the DJIA are the dividends that should be included in the rate of the average stock market return. Because of this, the payouts are of less value. But we can look at the compounded annual growth rate per year for DJIA which is around 2%.