This table shows the return on equities, bonds and treasury bills over the past 20 years in various countries - nominal return, inflation and real returns. Globally, equities earned a real return of 5.5% (after adjusting for inflation) compared to 1.6% for bonds. For the long term investor, it is better to invest in equities, as it provides a higher return than bonds or treasury bills. The risk of long term investments can be mitigated by the investment strategy explained in my book, Practical Guide on Financial Planning.
The ordinary account of CPF pays 2.5% interest. This is about the same rate as inflation. If the money is invested in Singapore equities, the nominal return is 9.4% over 20 years, or 7% above inflation. If invested in global equities, it should earn 5% above inflation.
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