Anonymous
What is a safe/reasonable compounding rate to consider for investments?
As an example, to hit FI status, I will need $250k invested at a 5% nominal compounding rate p.a. to provide a monthly of $1k, which covers my current monthly expenditure.
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Pang Zhe Liang
02 Jan 2020
Fee-Based Financial Advisory Manager at Financial Alliance Pte Ltd (IFA Firm)
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A reasonable compounding rate would mean taking reasonable risk aka the market risk.
The best market out there that continues to beat and leave others in its wake is the S&P 500, circa 7-9% annualized return
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Kelly Trinh
02 Jan 2020
Backoffice technical at financial services firm
A totally based on my gut and no specific research to back it - but perhaps the following as rough g...
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The most reasonable rate of return for any investment tool is the rate that fulfils your needs at a risk level that you can tolerate. Since different individuals have different risk appetite, there is no general returns that can be considered safe.
For instance, Singapore Savings Bonds is a relatively safe asset that yields 1.76% for a 10-year tenure. To some investors, this is reasonable since it is a relatively safe asset. However, others may have a different opinion since CPF yields a base rate of 2.5% per annum.
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