What is a target return?

A target return refers to the expected profit or gain an investor aims to achieve from an investment. It represents a specific objective that guides the investor's decision-making process, helping them assess whether an investment aligns with their financial goals. Investors set target returns based on various factors, such as their risk tolerance, investment time horizon, and market conditions.

This concept is vital because it enables investors to evaluate potential investments against their goals, leading to more informed choices about where to allocate their resources. Understanding and setting a target return helps in measuring performance, making adjustments to the investment strategy, and providing motivation.

In contrast, the other options do not align with the concept of a target return. Market trend predictions and average return rates pertain to analysis and performance assessment rather than specific return goals. The minimum return guaranteed by a financial institution is more about security and assurance than an aspirational target set by an investor.