The Success Formula of a Dynamic Entrepreneur Revealed & Exposed!

Have you ever ask yourself this question: “What is the minimum return my money need to generate in a year in order to “break even” (to maintain the value of your money)? The answer is (drum roll)…..

8. Woo. The famous number for Chinese! This number sounds like “Fa” (sound like strike it rich in Chinese). But that’s not the reason why we need to generate 8% a year in order for our money to break even.

A simple equation: Inflation + GDP (Gross Domestic Product Growth)

Inflation simply means that over time, prices get more expensive and the purchasing power of the same dollar will erode over time. Just think about it, 20 years ago, a movie ticket in Singapore cost S$2.5, now it is S$10 on average. Meaning to say, the same S$1 allow you to buy less as time passes. Get the drift? My guess is our inflation rate is about 3.5% a year.

GDP is a country growth rate, simply means the average growth of our nation living standard as a whole. It also means that our money should be growing at the same rate too in order to keep on par with the overall growth. I guess that SG grow about 4.5% a years after average out 41 years since independence.

Hence break even point for our money to stay relevant while keeping in track with growth = 3.5% + 4.5% = 8% (growing 8% compounded yearly)

By the way, this is only the break even point. This is just making sure that the value of your S$1 today is the same S$1 value 1, 5, 10, 20 and 30 years down the road. Anything less means that your money is losing its value in the future, let alone letting your money to appreciate.

Why am I sharing this? Because, once I know this, my mind start to question on the different financial investment options in the market to ensure that I get min 8% return a year! Anything less means my money is losing value. So, ask your banker or your financial agent this questions when they tout “new flavor of the month” to you: “Can you guarantee min 8% a year compounded ROI?” Same for property, before you buy, ask, “Can this asset generate 8% ROI excluding the interest rate that I pay?”

Mine is always min 15% because I know I am only getting 7% real return while 8% is non-negotiable. Personally, “Business” and “Value Investing” consistently beats above 8% and it has been working well for me so far.

Happy thinking and hopefully, you can find your platforms that generate a min return of 8% yearly.

You “Ken” Do It!

P/S: Forward this blog to your friends if you find it beneficial!