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| Minimum Acceptable Return |
Minimum acceptable return is a concept that is used in many performance measurement statistics to evaluate alternative investments. There is no set minimum acceptable return (MAR).
Rather, minimum acceptable returns vary from investor to investor, because a MAR is simply determined by an individual’s or institution’s investing goal. For example, if a retirement plan has annual liabilities of 8%, the plan’s investing goal, or minimum acceptable return, will be 8%.
In other words, desirable returns for that entity will be those that are greater than 8%. If an individual investor’s goal is to simply not lose money, his minimum acceptable return may be 0%, as any return above zero is acceptable.
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Still others may have a minimum acceptable return that is a benchmark, such as the S&P 500 or the Lehman Aggregate Bond Index, or a benchmark +x% to represent that only returns above what the investor can get in an index fund are acceptable. It is important to note that returns below a minimum acceptable return may not be negative, but they are not favorable based on that investor’s goals.
