What is a common expectation for return rates when valuing assets in financial markets?

The expectation for return rates when valuing assets in financial markets typically falls within the range of 12-15%. This range is often associated with equity investments and is considered a reasonable benchmark for long-term growth in stock markets, reflecting the higher risk and potential reward associated with equity investments compared to fixed income or cash-equivalent assets. This expectation of returns takes into account not only historical performance but also economic conditions, market volatility, and investor risk appetite.

In contexts like private equity and venture capital, where investments are inherently riskier and illiquid, the expectation for returns can sometimes be even higher, often cited as being in the 15-20% range. However, for broad equity market valuations, the 12-15% range captures a balance between risk and expected growth over time for long-term investors.