BiggerPockets

When is a 13% return better than a 15% return?

Monday, December 06

Returns, Returns, Returns!

We as investors are always looking at the rate of return on our investments. Stock and Mutual Fund prospectus love to show an average annual rate of return in their paperwork to give you an idea of what you can expect to earn year over year. Lets take a look at the rates of return for a popular mutual fund before the market crashed.

Year 1: 26% return

Year 2: 19% return

Year 3: 18% return

Year 4: 35% return

Year 5: -23% return

Investing just $10,000 over those five years would yield an 83.9% return or $18,391.79. Pretty good huh?

Now lets compare this example: A land contract note that you purchase yielding 13% a year.

Years 1 - 5: 13% return each year

Investing $10,000 into that land contract note would yield an 84.24% return or $18,424.35. A better return and it comes without the risk of market violatility.

What makes consistent investing like land contract notes even more attractive is when we look at returns for year 6

In year 6 of the mutual fund return they yielded a 11% loss. Dropping the value of the mutual fund to $16,368.69. It would take a 41% gain in year 7 to get back to that 15% rate of return.

In year 6 of the land contract note however, with the 13% return, the account value increases to $20,819.52.

As you can see from a simple small investment with consistent returns not only produces better returns over the long run but also gives you much more piece of mind, more stablity and solid financial growth!

Kevin Kaczmarek is the founder of Capital Blueprints, LLC an IRA education and investment company in Carmel, IN. Recognized as an innovative thinker, teacher and business leader Kevin helps others achieve their financial goals with Self Directed IRA Investments, and Passive Income Strategies. Kevin can be reached at kevin@capitalblueprints.com or 317-564-4820

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