When Higher Returns Make Sense (and When They Don't)

The S&P 500 has averaged about 10.5% per year since 1957. That's the baseline—what Austin Hankowitz and Robert Croak call a "normal return." It's not flashy, but it's one of the most reliable wealth-building machines ever created, with relatively low volatility compared to anything above it on the risk ladder. The entire question of whether to chase higher returns starts with knowing that number cold, because most people's expectations are warped by seeing someone on TikTok brag about a 5,000% meme stock gain.

The menu of higher-return options is not one thing. Single stocks remove diversification entirely—you're betting on one company's execution, competition, and leadership. AMD was up 190% year-to-date when they filmed; Nike was down 45%. Thematic ETFs like energy (XLE, up 38.5% that year versus the S&P's 14%) offer some diversification but concentrate an entire basket into one theme that can turn against you. Bitcoin runs at roughly four times the annualized volatility of the S&P 500—you can gain or lose 40% in a month. And venture investing is its own animal: a Correlation Ventures study found 65% of venture-backed startups failed to return even the original capital, while only 4% returned 10x or more. The further up the risk curve you go, the less time smooths things out. A company going to zero will go to zero whet