A lot of investors asked me, how to increase rate of return? It is commonly known that the higher the return rate, the faster you will achieve your financial goals. Just look at the chart below. A small difference in the rate of return will result in big difference after several years of compound interest effect.
Return rate doesn’t matter when you are just starting up?
Why did I say so?
When you just started out, you need to accumulate a sum of money significant enough for making some deals. The deals may be buying a significant amount of shares in good companies.
Big returns are reaped in those deals. So when you are just starting out, make sure you learn along the way. Accumulating a useful sum of capital, getting educated about making deals, and spending time finding those deals are more important than the rate of return. Imagine that you only have one thousand ringgit investment capital. It won’t make a difference if the return rate is 5% or 8%.
And you should never believe in something that will give you more than 20% return per annum without needing you to put in effort. Because the world’s most successful and wealthiest investor, Warren Buffett makes only 25% return per annum on average.
Higher return doesn’t mean higher risk?
It is common to hear remiser telling you that if you want to have a higher rate of return, you must be willing to take higher risk. Is that always the case? Not actually. There are people making a lot of money with very high rate of return investing directly in the stock market. Look at any business people, those who are successful make tremendous amount of money investing in their own business. Some of the businesses such as medical supplier but without medical knowledge are considered high risk by some people. But to those who repeat their success regularly certainly have a way to reduce the risk. They did it not based solely on LUCK.
Understand this fact – you can in fact get high return by staying low risk. The key is leveraging and control.
Don’t you ever laugh at those people who have a lot of fixed deposit in banks? You may say that they are letting their money depreciate because inflation will eat up their return in the long term. But at the time when cash is KING during recession, they are the one who have the largest amount of financial bullets to make a killing. These people are smart enough not to get emotionally involved in the market sentiment.
Return is not only in monetary form. Some people invest not only for monetary return. They invest for knowledge, for self-development, for better relationship, and also for relaxation of mind. These people invest money by buying Fiona’s books, attending Fiona’s seminar, going oversea for vacation with the whole family, like my brother. They see this kind of spending as investment too. These intangible returns are hard to be measured by numbers. Nevertheless, those items are considered investment too, even though the return is not in monetary form.
So, exactly how can you increase the rate of return?
Ignore the return rate when you are just starting to accumulate the first significant investment capital. The key is to save hard and learn smart. With enough experience, you will learn to make higher gain without taking higher risk unnecessarily. Finally, you will get the best return not only in financial form, but also self-improvement and balance life.
Selamat Hari Raya
And
Wishes luck prosperous will come to your way...
And
Wishes luck prosperous will come to your way...
By Brian (FCCA, CMIIA, MIA)
