If you have invested in Singapore or Global equity over the past 10 to 20 years, your average yield (computed up to 2007) would have been 8% to 9% per annum. The stockmarkets had dropped by 25% from its recent peak.
If you allow for this drop, the impact on the average yield would be 1% to 2.5%. The average yield would have dropped to 5.5% to 8% per annum. It is still an attractive yield, compared to other asset classes.
The secret: invest for the long term (10 to 20 years) and select a low cost investment fund (which takes away 1% or less). Better still, find the right time to invest - when the market has dropped 25%. This is a good time. Even if the market drops further, it will recover within the next 6 to 12 months.
Agree that Singapore / world equities have returned relatively good returns over the past 10 years.
ReplyDeleteI have done some studies on STI and several stock exchange indices and published them here:-
(1) STI - Straits Times Index
http://www.waynekoh.com/2008/06/sti.html
Annualized 10-yr returns: 8%
Annualized 20-yr returns: 5%
(2) S&P 500 - Standard & Poors 500
http://www.waynekoh.com/2008/06/us-s-500.html
Annualized 10-yr returns: 2%
Annualized 20-yr returns: 8%
Annualized 30-yr returns: 9%
(3) Other stock indices
http://www.waynekoh.com/2008/07/more-on-indices-part-2.html
The key points are:
Invest long term + apply asset allocation (diversify through sector/geographical allocation such as core-satellite approach) + "drip in money" along the way to reduce market timing risk.
Most importantly, discipline by adopting regular savings habit FIRST!