FAQ: Return from various types of investments

1. What is the return, over a long period, from different types of investments?

For global equities, the average return over the past 10 to 20 years, is about 8% to 10% per annum, in US dollars.

For global bonds, the average return is about 4% to 6% in US dollars.

The average return in US dollars, for a balanced portfolio (of equities and bonds) is about 6% to 8% per annum. Converted to Singapore dollars, the average return is about 4% to 6% per annum.

2. What is the expected return for the future?

Nobody knows.

For myself, I am happy to get an average return of 4% to 6% per annum, in a well diversified portolio of equities and bonds.

If I invest entirely in equities, I target to get 6% to 8% per annum on the average. I have to acceept the volatile returns. It can be quite high in some years and may be negative in other years. By investing for many years, the average return should be quite attractive.

3. Is it better to invest in equities or a balanced fund?

If you are a long term investor (10 years or longer), it is better to invest in a equity fund. Although equities are more volatile, the average return over a long period of time has always been higher than bonds.

If you are a short term investor and may need to realise your investments within the next few years, you should invest in a bond fund or a balanced fund.

4. Is it better to invest in global equities or in Singapore equities?

I prefer to invest in global equities. It offers better diversification. The fund manager is able to pick the best investments from a larger pool. The manager is not restricted to only the stocks from a specific country, i.e. Singapore.

The statistics over the past 10 to 20 years showed that the Singapore equities are more volatile and earned a lower averge return, compared to global equities.

As the world is now more globalised, it is better to be invested in global equities.

5. What is your estimate of the return from various types of investments in today's environment?

My estimate is:

6. What is your estimate of the return from various asset classes in today's environment?

 My estimate is:

High volatility: indicate that the actual return can be quite far away from the average, in some years.

7. What is the actual return over the past 20 years?

The annualized returns, converted to  SGD and include reinvestment of dividend, are as follows:

It is better to invest in global or Singapore equity, if you are investing for the long term, ie 10 years or longer.