Date: 2026-07-01, Wednesday, 02:26 PM
Using Claude AI to learn new financial topics.
Hurdle Rate
2026-07-04, Saturday, 01:17 PM
The minimum return I require before I’m willing to invest. It is the minimum return that I expect for the money to be worth it. For eg, if I say that I need 10% minimum return from share market, 10% is my hurdle rate.
How do I come up with a number (like 10%)? See if you already have any debt. Say you have a debt at 13% for 10K, and I spent it somewhere. Say I earn another 10K from somewhere and I decide to invest it, cause I need extra Rs. 1300 to completely pay off my debt. To break even, with the debt, I need a hurdle rate of 13%. (any investment should be expected to earn more than 13% (after considering risk) to justify not repaying the debt.)
So your hurdle rate is at least 13%, and in practice you might even require more because investing is riskier than eliminating debt.
You can think of the hurdle rate as minimum acceptable return.
If your best safe alternative is a 10% steady investment, your hurdle rate is 10%.
If you expect less than the hurdle rate, you should reject the investment.