What’s the difference between yield and return on effort?
Yield is another word for return on investment (ROI) – in this case, we are specifically talking about investment of capital.
You put money into some sort of investment, and you expect to get it back – plus an additional return.
A lot of people focus on getting the highest return or interest rate possible for their money.
It makes sense, right?
A couple of caveats come with that though.
There is, of course, often the potential for higher risk when you chase a higher return.
But I believe the bigger factor is how it affects the return on your effort – your return on time (ROT.)
If you have to put in a lot of work to find, manage, or put together those higher-yield deals, the cost is now not just financial – it’s costing your time.
If finding great deals is what you do every day on a regular basis, then you should be spending your time on maximizing yield and fine-tuning the constructs.
But what if you want to be a more passive investor?
I personally want more of my time.
I’d rather rely on other people who put in the time to find and structure great opportunities.
I’d rather give them a better yield for their time and effort, and I’m happy to take a little bit less because I’m not putting my time into it.
You don’t want to be trading time for dollars for the rest of your life. At some point, you need to trade some of that monetary yield to get more of your time back.
To your freedom!
David
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