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Seven Principles of Investment - No.3: Insist on Rewarding Returns

We live in a strange world. I ask this question of many investors; “what do you consider to be a reasonable return on your investment money”. Most of them answer in the range of 1% - 3% annually. In fact, many investors don’t believe that a substantially higher return is achievable. So much for the power of brainwashing by mainstream financial services providers!

When I share with investors that the focus of Avantis Wealth is on investments that offer from 7% to 15% annually, often with income paid quarterly or even monthly, they are astonished.

With inflation at around 3% long-run average, anything that returns 3% pa or less is at best maintaining, and at worst losing, capital value every year. This is what investors settle for time and again.

The situation within pensions is even worse. The precious capital sum accumulated over many years is subject
not just to failed investment returns, but also exposure to fees and charges that can destroy any value that has managed to be created through the investment portfolio.

Yet rewarding returns are absolutely essential for everyone who invests with perhaps one exception. Maybe you have so much capital that you can accommodate your, and your extended families needs in this lifetime and for the next few generations. In this instance, it may not matter if you don’t get a decent investment return. Your focus may be on preservation of capital.

For most of us, however, this does not apply. It really does matter that you get a decent return. Why is this so?

  • If you are investing for retirement in the future, then you need growth in the portfolio, inside or outside a pension
  • If you are seeking income from your portfolio, then you need rewarding returns to give you that income
  • If you are saving for the future, you need rewarding returns to meet your savings targets

    In my world, rewarding returns fit in the range of 7% to 15% annually – as fixed income that you can rely on. And before you dismiss this level of return as non-achievable, or hugely risky, I politely suggest that you investigate carefully and see the full due diligence picture across a range of potential investments.

Read about all 7 principles of investment by downloading our report. The report equips you with the knowledge of how to improve your chances of success and make the most of your investment portfolio.

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