The one number every investor must know—but rarely does

Now, imagine the same match—same players, same chase—but this time, no one tells them the target. Just go out and bat.

Sounds absurd, right?

And yet, that’s exactly how most people approach their financial goals. We invest, save, and take risks—all without knowing our own required rate of return (RRR)—the personal target that should guide every financial move we make.

Also read: Why smart investors still make bad decisions

What is the required rate of return? Simply put, RRR is the minimum annual return your investments need to generate to help you meet your life’s financial goals—retirement, your child’s education, that house you dream of, or even the sabbatical you plan a decade from now.

It’s not about market predictions or the next hot stock. It’s not even about maximising returns. It’s about you. Your income, expenses, liabilities, lifestyle, and aspirations. Your finish line. And the time you have to get there.

Why most investors don’t know their RRR

Despite being crucial, the RRR rarely makes it into everyday investment conversations. Instead, most advice focuses on your risk appetite or picking between equity, debt, or gold. For many—especially first-timers—investing becomes a leap of faith: choose something and hope it grows.

Hope, however, is not a strategy.

Skipping the RRR is like batting without checking the scoreboard. You might burn out early chasing a target that needed patience—or lose the match while playing too defensively.

Let’s break it down with two possibilities:

Your portfolio is geared to earn less than your RRR: You might fall short. The retirement corpus won’t be enough. The college fund might be inadequate.

Your portfolio is geared to earn much more than your RRR: Sounds good? Maybe. But the higher the return target, the higher the risk. You may be riding more volatility than your situation demands—or than you’re emotionally ready for.

But isn’t RRR complicated to calculate?

Yes—and no.

Unlike cricket’s straightforward runs-per-over calculation, the RRR for your finances is based on multiple moving parts:

• Your current income and expected income growth
• Regular expenses and how they may rise with inflation
• Liabilities like EMIs and credit card debt
• Future goals and their timelines
• Your investment horizon, and
• Assumptions around inflation and life expectancy

It’s not something most of us can calculate on the back of an envelope. But that doesn’t make it inaccessible. With the right guidance or digital tools, it can be done.

Why it matters more than ever

In cricket, a team can recover from a bad game—there are more matches in the season. But in personal finance, second innings are rare. 

One poorly timed shot—skipping health insurance, delaying SIPs, or chasing the latest crypto tip—can throw your entire plan off track.

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Think back to your recent money decisions: Did you buy that car, pause your SIPs, or jump into a new investment trend—without knowing your RRR?

Chances are, you didn’t factor it in. Most people don’t. But this one number can act as your financial north star—quietly guiding every move.

It can tell you:

• How much you really need to save each month
• Whether you can afford a break from work
• If your current asset mix is on track, or
• If your portfolio is taking on too much—or too little—risk

How to get started

You don’t need to be a finance expert. You just need to ask the right question: ‘What is my required rate of return?’

A good financial advisor can help you calculate it. So can certain digital tools, if they’re personalised enough. 

What matters is the shift—from chasing products to chasing purpose.

Because, once you know your RRR, you stop guessing and start strategising. No more random investing, no more hoping for the best. You begin making moves with intention—and that’s when real progress kicks in.

The RRR isn’t some stock market figure. It’s personal. It’s your number. And once you know it, you’re not just playing the game—you’re playing to win.

Also read: Devina Mehra: Forgetting history can be costly, especially so while investing

Ashish Khetan is a registered investment advisor and founder, Serenity Wealth