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.

You will get more than double the return just by slightly increase the return rate per annum over 20 years.

Return rate doesn’t matter when you are just starting up

Yes. It really doesn’t matter. 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 about starting a business, buying a significant amount of shares in really good companies, or investing in a property.

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 then 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 20%.

And you should never believe in something that will give you more than 25% 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.

This leads to the second important fact about rate of return.

Higher return doesn’t mean higher risk

It is common to hear financial planner telling you that if you want to have a higher rate of return, you must be willing to take higher risk. It is even more common in unit trust investing when a consultant tell you that equity funds is more volatile but you may get higher return in long term. Meanwhile some bond funds or fixed income fund give safe but boring return.

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 construction and housing development are considered high risk by average 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. You can only find great leverage and high level of control in your investment when you realize the next point I am going to deliver to you. Which is…..

Return is not only in monetary form

Don’t 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 (think of 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.

And wait, there is another point you are missing here. 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 books, attending seminar, going oversea for vacation with the whole family. 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.

Couple these types of investment return with monetary return, you will find those successful people who enjoy every minute of their life. For example, the owner of Sakae Sushi loves Japanese food and he thinks that Japanese food shouldn’t be so expensive. He not only fulfilled his goal but also bring cheaper Japanese foods to us as consumers.

Another example I would like to quote is Sting, the former member of the Police band. Once he said that he doesn’t do music people likes to hear. He just composes what he loves to hear but other people just happen to like it. And he won several Grammy awards in the process, not mentioning all the money he makes from albums and concerts.

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.

Does this make sense to you?

best regards,


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Personal finance author and trainer

    3 replies to "How do you increase the rate of return?"

    • Will Lim

      you should never believe in something that will give you more than 25% 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

    • Lai Seng Choy

      It make sense. As a matter of fact, investment risk will reduce when time goes by as we all learn from the process. Experience will help for better gain with lower risk exposure.

      I used to worry about my investment but now no more as I learn from my mistake. It costs me but these costs are good for providing good lesson. Just my 2-cent, people tend not to learn until they really experience it.


      • KCLau

        Experience plays a big role in shaping one’s risk appetite.
        Great to hear your thought. 🙂

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