Listen, I need to tell you something that's going to sound mental at first – those investment returns you're celebrating?

They're probably losses in real terms. I know, I know… WTF, right?

I discovered this the hard way after moving to the Middle East as an expat engineer.

I was finally able to save more money than I spent and had no idea how or what to invest in – I sat on cash for years and at the time I didn't know it but looking back now my money was melting away like an ice cream in the sun.

Looking back now I realise I was stupid but when you have no idea, you have no idea so I try and not be so hard on myself now.

Fast forward a few years later in 2024 and I stumbled across the concept of the everything code that is driving the investment hurdle rate, and mate, it properly blew my mind.

What reinforced my conviction in investing in assets that beat the hurdle rate even more is when coming across the economic singularity and why we need to make as much money as we can by 2030.

This is also why I believe Bitcoin will be instrumental in helping people achieve financial independence, as I explain in my post about how Bitcoin can accelerate your path to financial independence.

The Real Investment Hurdle Rate Explained

Here's the thing that's doing my head in – we need 11% returns just to break even. Not to get ahead. Just to stay still.

Let me break this down in simple terms:

  • 8% currency debasement – the silent wealth killer nobody talks about
  • 3% inflation (and honestly, I reckon it's higher)

That's your real hurdle rate: 11% just to not get poorer.

Not 2 – 3%

For those FIRE guys (myself included) – in the online caluclators and spreadsheets it says just put 3% inflation int here don;t worry – your 10% returns will account for inflation and you wil lstill grow 7% per year….

Let me explain why, unfortunately, that’s BS.

Breaking these numbers down a bit further:

Real Inflation

I have written in more detail in my blog post here about why inflation is much higher than they say. Governments try to keep inflation around 2 – 3%.

I think this is much lower than reality – I mean do you think prices over the past few years have only increased by 3%.

To try and not be too doomsday here lets stick with the 3% number, even though I think it is MUCH higher than this – as I explain here.

Money Printing – Global M2 Money Supply:

Using the global M2 money supply from this chart, I calculate the Compound Annual Growth Rates (CAGR) are:

  • 2020 to 2024: 7.56% per year
  • 2010 to 2020: 5.99% per year
  • 2000 to 2010: 9.04% per year

This seems to tally with Raoul Pal , who has said that global M2 money supply is around 8%, in his brilliant video here. Raoul is much smarter than me so I’ll go with 8%.

So this means that on average, all fiat currencies are printing around 8% more per year. I break down in my blog post here just how much your money is being devalued every year.

The hurdle rate

The hurdle rate is the rate that your investments, your wealth, needs to grow by every year just to keep the same purchasing power.

The hurdle rate is inflation + money supply

= 3% inflation + 8% debasement = 12%

Even I think this could be a tit low and 15% – 20% is maybe more realistic to account for how much prices have actually gone up but as always I will stick with Raoul on this one and make it simple, call it 11%

Seriously think about the big expenses in your life – has your rent or mortgage only gone up by 3% a year? groceries? gasoline? utility bills?

Anyway, ever sticking with the 11% number, Why is this significant?

Well its almost 4x bigger than the typical 3% we have been taught to put into our future calculations for our investment growth – don’t worry you only need to beat 3% inflation.

What happens when the real number is 11?

The Double Whammy That's F*cking Us All

Right, here's where it gets proper mental. We're getting hit twice:

  1. Everything's Getting More Expensive
    • And I mean everything
    • Way more than the official 3% inflation figure
  2. Assets Are Getting More Unaffordable
    • The average house price is mental
    • Stock market valuations are through the roof
    • Try getting on the property ladder now vs 20 years ago

This creates a nasty cycle: your money buys less AND it's harder to invest in traditional assets that might help you keep up.

Traditional Investments vs The Hurdle Rate

Let's look at how common investments stack up against our 11% hurdle rate:

  • Savings accounts: 3-4% (Actual return: -7%)
  • Government bonds: 4-5% (Actual return: -6%)
  • Stock market average: 8-10% (Actual return: -1% to -3%)
  • Property (unlevered): 6-8% (Actual return: -3% to -5%)

Link to: "Understanding Why Governments Keep Printing Money"

Brutal, right? No wonder we're all feeling like we're running to stand still.

What Actually Beats The Hurdle Rate?

It looks like there are only two types of assets that will beat the investment hurdle rate:

  1. Technology Stocks
    • NASDAQ CAGR: 17.3% (1971-2024)
    • Beats the hurdle rate by 6.3%
  2. Cryptocurrency

The Good News (Yes, There Actually Is Some)

Here's the kicker – for the first time in history, we've got democratic access to assets that can actually beat this hurdle rate.

You don't need to be a millionaire to participate.

When I first moved to Dubai, I thought stocks/bonds and maybe real estate was the answer. I mean I kept hearing about people with massive portfolios or who had lots of rental properties living the dream.

It seemed simple in one way – i.e. this is the end goal but it also seemed very unattainable – how am I going to be able to save enough money to get either of these things?

But you know what?

Even with my engineer's salary, getting into the property market was tough. But tech stocks and crypto? I could start with $100.

This is properly revolutionary, and here's why:

  • Anyone can buy fractional shares or small amounts of crypto – remember 1 Bitcoin is broken down into 100,000,000 Satoshis.
  • You don't need to be rich to start
  • The same assets are available to everyone
  • No minimum investment gatekeepers

How To Actually Use This Information (Practical Steps)

Look, understanding the investment hurdle rate is one thing.

Actually doing something about it? That's where most people get stuck.

Here's my practical framework for dealing with this reality:

1. Calculate Your Real Returns

First thing you need to do is stop lying to yourself about your returns. Here's my simple method:

Investment Return – Hurdle Rate (11%) = Real Return

For example:

  • Your "amazing" stock pick: +15%
  • Minus hurdle rate: -11%
  • Real return: +4%

Not quite as amazing now, is it?

2. Audit Your Current Portfolio

Time to get brutal with your investments. Here's what you could do:

  1. Listed every investment I owned
  2. Calculated real returns (using the formula above)
  3. Identified which ones were actually losing me money in real terms

Escape the Rat Race: Investing in Your Future with Alternative Assets

3. Position Sizing For The Real World

Here's how I am thinking to structure my portfolio to beat this hurdle rate.

To note that it is 2024 and I am expecting another crypto bull run into 2025 so I want to make the most of this 4 year cycle.

Once this is done I need to think about how to structure my portfolio, here is what I am thinking could be a good idea:

  • Core Holdings (60-70%): Assets that reliably beat 11%
  • Experimental Growth (20-30%): Higher risk, higher potential return
    • Individual tech stocks
    • Early-stage crypto projects
    • Always sized appropriately for risk
  • Traditional Hard Assets (10-20%): For liquidity and stability
    • Gold / Silver (maybe a75/25 split)
    • Real Estate (if there is enough money for a deposit maybe it makes sense to buy an investment property?)

    Yes, these lose to the hurdle rate but they're there for reducing risk

4. Geographic Arbitrage

This is my secret weapon for amplifying returns. Living in Dubai as an expat, I:

  • Earn in tax-free dollars
  • Have lower living costs than London/NYC
  • Can invest more of my gross income

How Living Abroad Accelerated My Financial Independence Journey

Even if you can't move abroad, you can still use geographic arbitrage:

  • Remote work from lower-cost areas
  • Investment opportunities in different markets
  • Currency advantages where possible

5. Regular Review System

I will check my real returns quarterly using this system:

  1. Calculate nominal returns
  2. Subtract the hurdle rate
  3. Adjust positions based on real performance
  4. Look for new opportunities beating 11%

This is a complete work in progress – I am sure II will revise this next year but somehow I would like to be allocated enough into the two biggest themes I see impacting the next decades – Crypto & AI.

Common Objections (And Why They're Misguided)

Whenever I discuss the investment hurdle rate, I encounter some predictable pushback. Let's address the most common objections:

"The Stock Market Always Goes Up!"

Sure, but here's the catch—you need to focus on real returns, not nominal ones. According to historical S&P 500 data from Ibbotson Associates, even during "great" periods, many investors barely outpace inflation, let alone the full hurdle rate.

What is Fiat Money

"Gold Is The Answer!"

Gold bugs, I appreciate you and we are after the same thing – a way to counteract insane money printing, but the numbers don't back it up to be all in on gold

Even gold's long-term performance fails to consistently beat the hurdle rate.

Don't get me wrong—I'm not anti-gold, but it's not the silver bullet many believe it to be.

"This Time It's Different!"

Actually, it's not. Take a look at my post about the Gold Standard vs Fiat Money, and you'll see this pattern has played out before.

What The "Smart Money" Is Doing

Here's something intriguing: while most retail investors cling to traditional thinking, institutional investors are pivoting:

The Most Common Mistakes I See

Trust me, I've stumbled into most of these pitfalls myself:

  1. Fixating on Nominal Returns
    • "My 8% return is fantastic!"
    • Sorry mate, you're actually down 3% in real terms

    Unfortunately, even if it looks like your investments are increasing it is only an illusion when you compare it to your purchasing power.

  2. Overlooking Currency Debasement

I wish it wasn’t like this but unfortunately it is and I know my future self in 20 years will be glad I figured this out now rather than int he future when I probably can't do anything about it.

  1. Playing It Too Safe

I am not saying go all in on crypto but in my opinion (Not Financial Advice) some exposure into bitcoin is a good hedge against this F’d up system.

Final Thoughts (And What Comes Next)

Look, I know this is a lot to take in.

When I first realized how the investment hurdle rate was affecting my wealth, it properly blew my mind and really pissed me off – still does to be honest.

But here's the thing—understanding this concept is half the battle.

You can either accept it and figure out how to beat it or slowly lose your purchasing power.

Key Takeaways

Let me break down the most crucial points:

  1. The 11% Reality
    • 8% currency debasement
    • 3% inflation (at minimum)
    • Anything less = you're getting poorer
  2. Traditional Investing Is Broken
  3. There Is Hope
    • Tech and crypto consistently beat the hurdle
    • Democratic access to these assets
    • Geographic arbitrage opportunities

Your Next Steps

Don't let this overwhelm you. Start here:

  1. Calculate your real returns (use the formula above)
  2. Identify which investments are losing to the hurdle rate
  3. Start learning about tech and crypto investments
  4. Consider your geographic arbitrage options

Stay Connected

I'm constantly updating my research and findings on beating the hurdle rate. Here's how to stay in the loop:

Remember: Understanding the investment hurdle rate isn't just about numbers—it's about taking control of your financial future. The game has changed, but now you know the rules.

What's your take on this? Are you calculating your real returns correctly? Let me know in the comments below.

Disclaimer: This isn't financial advice. I'm sharing my personal journey and research. Always do your own research and consider your circumstances before making investment decisions.

Adam

I am on a journey to embracing a less stressful, more self sufficient life through my passions for renewable energy, off grid living and financial independence.

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