Hurdle Rate: Minimum Acceptable Returns

A concept that could help my buy, sell, hold decision making process is the hurdle rate. The hurdle rate is the minimum acceptable rate of return an investor requires for that endeavor to be considered worthwhile.  Factors such as the cost of capital (e.g., the interest rate charged to borrow money for example), risk premium, and inflation are figured into the final hurdle rate.  

A related concept is the ‘risk-free rate’ or the rate of return for a US Treasury debt instrument of a similar duration to your investment for comparison. To illustrate, if I estimate a return of 3% over 10 years for a specific stock I am considering buying, then I should compare that to the rate of return I can get for a 10 year US Treasury. To illustrate, let’s say the US Treasury is yielding 5% for 10 years at the time of my decision. My estimate is 3% for the stock which is less than the hurdle rate of 5% so I should consider not buying the stock. I found that Federal Reserve Economic Data (FRED) publishes US Treasury rates that can be used as comparisons. 

So what should my personal hurdle rate be set at? I believe that hurdle rate should be set on a per asset/asset class basis to better reflect the true opportunity cost and risk exposure. 

For this purpose, I am working with the following hurdle rates to influence my investment decisions across asset classes:

Traditional Assets hurdle rate for 10 years:  

Equities: 10% 

Bonds: 11%   

Cash: 3%  

Alternative Assets hurdle rate for 10 years

Real estate: 10% 

Commodities: 15%

Private equity: 15%  

Cryptocurrency: 15%