How to Get a 10% Return on Investment (ROI)

A 10% return on investment (ROI) is possible, but it is never guaranteed. ROI is a financial metric widely used to measure an investment’s gain or loss relative to its cost. It is calculated by subtracting the cost of the investment from its current value and then dividing the result by the cost of the investment. The investment choices considered when pursuing a 10% return on investment ultimately depend on several factors.

Working through these calculations and investment choices can be complex, which is where a financial advisor can be particularly helpful.

What Is Your Return on Investment?

Return on investment, commonly known as ROI, measures the profitability of an investment relative to its cost. This financial metric helps you evaluate how efficiently your money is working for you. By calculating ROI, you can compare different investment opportunities and determine which ones provide the best value for your financial goals.

Calculating ROI involves determining the gain from your investment relative to the cost of your investment. Let’s simplify it with an example. Assume you invested $1,500 and later the investment is worth $1,650. Your ROI is then ($1,650 – $1,500) / $1,500 = 10%.

Regularly tracking your ROI can be made easier with digital tools or even the assistance of a financial advisor. ROI can help assess an investment’s performance and compare it with other investments.

While the standard ROI formula provides useful information, it doesn’t account for important factors like time horizon or risk. An investment portfolio that delivers 20% over one year is typically more valuable than one delivering 20% over five years. Similarly, a lower-risk investment might be preferable to a higher-risk one with the same ROI.

How to Get a 10% Return on Investment (ROI)

Getting a 10% return on your money sounds great, but it depends a lot on what you invest in and what the market is doing.

The math behind ROI is simple: take what your investment is worth now, subtract what you originally paid and then divide that number by your original cost. But the timing matters, too. Making 10% in one year is much different than making it over five years. Risk also plays a big role. Higher returns usually come with more risk, so it’s important to look at the full picture.

Some people try to hit that 10% mark by investing in stocks, real estate or other high-growth opportunities. These can work, but they also come with ups and downs. Talking to a financial advisor can help you find a mix of investments that make sense for your goals. It’s also a good idea to check in regularly and make changes if needed. What works one year might not work the next.

Investments That Can Potentially Return 10%

Investing money wisely is a skill set that isn’t just reserved for Wall Street tycoons. With the right knowledge and strategies or the guidance of a skilled financial advisor, anyone can make strides to unlock their wealth potential and aim for a 10% return on investment. Nevertheless, it’s important to proceed with caution because past returns are not indicative of future results.

Here are eight investments that have the potential to return 10% or more over time.

1. Growth Stocks

Growth stocks represent companies expected to grow at an above-average rate compared to other companies. By investing in these companies, particularly in sectors like technology or biotechnology, you can benefit from significant capital appreciation as these companies expand and increase their market share. High-profile examples include companies like Amazon, Apple and Tesla.

2. Real Estate

Real estate investments can generate substantial returns through both appreciation and income. Rental properties in growing markets may deliver combined returns exceeding 10% through rent payments and property value increases.

Real estate investment trusts (REITs) offer a more accessible way to invest in property, with many historically providing dividend yields of 4% to 8% plus potential appreciation, potentially exceeding the 10% threshold.

3. Junk Bonds

Junk bonds are high-yield corporate bonds issued by companies with lower credit ratings. Because of their higher risk of default, they offer higher interest rates, potentially providing returns over 10%. During economic growth periods, the risk of default decreases, making junk bonds particularly attractive.

4. Index Funds and ETFs

Investing in index funds and ETFs that track high-growth sectors or emerging markets can yield higher returns. While traditional index funds like the S&P 500 might not always provide 10% returns, sector- or market-specific funds might offer higher growth potential, especially in bullish market conditions.

5. Options Trading

Options trading involves buying and selling options contracts, which can yield high returns if the underlying asset’s price moves favorably. Strategies like buying call options (betting that the asset’s price will rise) can provide substantial gains. Just note this strategy requires careful market analysis and carries high risk.

6. Private Credit

Private credit involves lending directly to companies or individuals outside of traditional banking channels, often through private funds. These loans typically offer higher interest rates due to their illiquidity and risk profile. By carefully selecting borrowers and spreading risk across multiple loans, investors could achieve high returns.

7. Private Equity and Venture Capital

For accredited investors, private equity and venture capital investments offer potential for significantly higher returns. These investments involve providing capital to private companies with strong growth prospects. While extremely risky and illiquid, successful venture investments can generate returns of 20% or more annually when part of a well-managed portfolio that accounts for the inevitable failures.

8. Business Ownership

Starting or purchasing a business represents another path to potentially high returns. Small business investments can generate substantial profits when the enterprise succeeds, often exceeding 10% returns on initial capital. However, this approach requires a significant time commitment, specialized knowledge and comfort with uncertainty.

Diversifying Your Portfolio to Reach a 10% Return 

Diversification is a risk management strategy that entails including a wide variety of investments within a portfolio to potentially achieve higher returns with lower risk. A diverse portfolio could consist of 30% in a mix of value and growth stocks, 30% in index funds, 20% in bonds, 10% in real estate and 10% in alternative investments like P2P lending or commodities. However, diversification can have nearly unlimited combinations, depending on what your goals are. 

The benefits of diversification come from balancing returns across different investments while spreading out risk. If one type of investment drops, your entire portfolio won’t take as large of a hit if other investments perform differently. While diversification can reduce portfolio risk, it cannot guarantee a 10% return or prevent losses, though.

Bottom Line

Investing is a financial strategy that can lead to substantial wealth over time. Nevertheless, it’s not a guaranteed path to riches. It requires care, patience, regular reviews and possible adjustments over time. Choosing investments that match your goals, risk tolerance and time horizon can help you build a portfolio designed for long-term growth. Making use of professional advice from financial advisors can also be beneficial in achieving your desired returns.

Tips for Investing

• It can be difficult to find the right investments to meet your overall financial needs, especially if you’re not an experienced professional. With the help of a financial advisor, you can find the right balance in your portfolio to aim for a 10% return over time. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. From there, you can have a free introductory call with your advisor matches to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. 
• You can use SmartAsset’s free asset allocation calculator to see what your portfolio might look like based on your chosen risk profile. 

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