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What is an average (return) you can expect in an average portfolio, if one was to invest $200,000 in stocks vs. a money market account?  Does your return average any higher with more invested? I just hear so many different responses from different investors.
— Tom L., Sierra Vista, Ariz.

The return you can expect on any investment is pretty much a function of how much risk you’re willing to take. Money market accounts, bank savings accounts and U.S. Treasury securities are among the safest investments. As a typical example, the average return on a 1-year certificate of deposit is currently 4.84 percent, according to Bankrate.com.

If you’re willing to take on more risk, you can invest in stocks. Since 1990, the average 12-month return for the stocks listed in the Standard & Poors 500 index was about 18 percent. But those returns, which include the Internet bubble, have been unusually high. If you invested in the S&P 500 at the start of this decade, for example, you're only now getting back to where you started.From 1802 through 2003, the stock market’s “real” return — adjusted for inflation — averaged 6.8 percent a year, according to a 2004 paper by Wharton School finance professor Jeremy Siegel.

By comparison, Siegel says that over the long-term, bonds have paid average real returns of only 3.5 percent. Though he notes that bonds averaged 8.4 percent a year during the '80s and '90s, that was because interest rates were falling from very high levels brought on by the high inflation of the '70s.

Of course, if you pick the right stocks, you can do better than those averages — but that’s easier said than done. If you want to invest for a higher return without the risk of picking the wrong stocks (or the wrong money manager), you can buy index funds which spread your money across all the stocks in a given index. You also avoid the management fees and broker commissions you’ll pay if you invest in individual stocks.

Generally, investing more money doesn’t give you a higher return — by itself. It’s true that there are some investments — like hedge funds — that are closed to “small” investors. But you can lose big money in hedge funds too.

One thing to keep in mind is that some returns you may hear quoted from investors may tend to be — how shall we put this — presented in the best light. People tend to be much more willing to talk about their winners than their losers.

In the end, decisions about risk and return are very personal. Some people don’t like the idea of losing a big chunk of money — so they stick with Treasuries even though that means they might get a lower return than stock investors.

And there’s nothing wrong with that: It’s your money.

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