1. #1

    Join Date
    Aug 2011
    Lahore, Pakistan
    Blog Entries

    What is the minimum return an investor should look forward to?

    Investors often want to maximize return on investments. We are so greedy that many times that we want maximum return even without quantifying what should be the maximum return. In the process of finding out what should be maximum return for an investment, we often tend to duck the question which is equally important and i.e. what is the minimum return that we should get on our investment?

    This question is equally difficult to answer but fortunately that are answers available. An investor should atleast look forward to a risk free return. This is offered by the bonds issued by the government. To get risk free return, an investor need not have great skills; only having information about the instruments offering risk free return will help investor realize this return. If you are getting less than risk free return in any investment, it is time to shun that investment.

    Another question that an investor needs to find answer for is whether this risk free return is good enough to beat the prevailing inflation in a country. Why is it important to check this aspect? However, once an investor has locked his investment at a particular rate and holds the risk free instrument till maturity, inflation data will not remain same for this period. It will keep on changing. It is possible that when inflation goes down below, blocked risk free rate, there will be a positive real return.

    However, when inflation goes up, real return may become negative.

    Hence the answer to the question is that every investor should forward to a return which is risk free and can beat inflation.

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