How to determine if the rate of return you’re getting is the right one
The rate of return is one of the key considerations when creating an investment plan, it’s the rate at which your money is expected to work for you. Other factors you should think about include; the investment risk, available capital (investable amount), your financial goals, investment period, etc.
How do you determine whether the rate of return you’re getting is the right one?
- Does it outpace inflation? – a return above the inflation rate ensures you grow your capital and also preserve its value.
- It should enable you to achieve your financial goals – the purpose of investing is to make money in order to meet specific financial objectives, therefore it’s only fair and reasonable to demand your investments earn a return that enables you to meet your set objectives.
- How does the return compare to the market average? – ensure your investments at the very least keep pace with prevailing market rates.
- How does it compare to returns of similar asset classes? – find out if your investment is earning a similar return to others within the same Asset Class.
Whether you are an individual investor, a group, or a business, you can achieve your goals much faster through a well-thought-out strategic investment plan that yields above-market returns. Investing with long-term view will give you the most rewarding results, time and compound interest does most of the work for you.
