GLOSSARY TERM
Expected Return
Expected return is the return an investor reasonably hopes for over time, based on assumptions rather than certainty.
What does this mean in practice?
It is used for planning, not prediction. Expected return helps you estimate what a portfolio might achieve over many years, but real returns can be higher or lower, especially over shorter periods. It is better understood as a working assumption than as a promise.
Example
You may assume that a broad stock portfolio could grow at a certain average annual rate over the long run, even though some years will be much stronger and others much weaker.
Why it matters
Expected return helps with realistic planning. It can help you estimate how much you may need to invest and how long it may take to reach a goal, while also reminding you that investing always involves uncertainty.
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