Maximize Your Rate of Return
Author: Skia
Category: Free Talk
The other variable in our formula is the rate of return, commonly known as the “interest rate”.
As we saw previously, increasing the interest rate has an even more dramatic effect than the number of periods. In fact, it’s the single most powerful factor in multiplying your wealth.
A simple number pattern shows how this works:
1 x 1 x 1 = 1
2 x 2 x 2 = 8
3 x 3 x 3 = 27
4 x 4 x 4 = 64
5 x 5 x 5 = 125
Again, this is the exponential effect at work. A small increase on one side of the equation produces a rapid increase on the other side.
How do you increase your rate of return? Well there are many types of investment vehicles available and this is where you need to talk to a professional financial advisor.
However there are two ways you CAN enjoy a superior rate of return. And the good news is, they’re both directly under your control.
Method 1 – Education
Earners are learners. And vice versa.
The more you learn, the more you earn. The more you earn, the more you can save. And the more you save, the faster you can reach your financial goals.
That’s why Benjamin Franklin said:
“An investment in knowledge pays the best interest.”
The real rate of return here is not an interest rate per say, but rather the return you enjoy on that most precious commodity of all: TIME.
If you’re time is worth $50 an hour, and somebody else’s is worth $20 an hour, then you’re enjoying a 250% advantage for the same amount of time. Over the years that’s one huge advantage.
Getting yourself an education, particularly to learn specialist in-demand skills, is one of the smartest things you can ever do.
Learn more to earn more.
Method 2 – Run your own business
You probably noticed that some of the illustrations used in this report have quoted interest rates of 20%, 40%, even 100%.
And you might think that such return rates are unattainable through traditional investments like the savings account at your local bank.
Well you’re correct!
If you’re lending your money to other companies and organizations, they only pay you interest because they are making many times that amount themselves.
And that’s why there’s really only one way to earn top returns on your money, and that’s by investing in your own business. Look at it this way:
Suppose you invest $100 for 5 years at 10%. When the time is up, your $100 is worth $161.05. So your money grew by 61.05% over 5 years. Now imagine that you visit a local wholesaler and buy 50 T-shirts at $2 each. Total cost: $100. You sell the T-shirts the following Saturday at a local market stall for $5 each. Total revenue: $250. You turned $100 into $250, so your money grew by 150% in a single week. Now the above is a very simple example. It assumes that you could sell all the T-shirts, and that there were no other expenses (like transport costs, and renting a market stall, for example). But… it shows you the sheer power of making money in your own business. You could take your $250 and reinvest, say $200 by buying 100 T-shirts and selling those for $5, this time making $500 at the market. The following week you could expand into other product lines. Then could open a second stall in another market. Then you could start a second business…. and so on. |
Many great business empires have begun in exactly this way, by using the power of multiplication.
Two quick tips for starting your own business:
- It’s generally best to start small. That way, you can avoid expensive mistakes by learning the ropes as you go along.
- Choose a business that suits you - your personality and your interests.
investment property
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