Asked on 12 Mar 2019
Hey there! I think maybe you can consider to look from another perspective: What kind of returns do you want to achieve? Through this, you have a clear goal of what you want, and working towards that goal will bring you abundance, way more than the expected returns. And besides, no one said a beginner can't achieve 20% compounded growth every year! :)
For a start, I think you shouldn't focus on the returns.
Focusing on returns may make you stressed out on achieving the figures, which cant be controlled.
Get a clear idea on what type of investing you like and am comfortable with.
Once you have that, focus on improving your research process.
With a good foundation, you are more likely to survive the market.
Think long term. Most people lose money on the market, so for a start, if you can get through your first few years without losing money, that is already better than most people.
In the long run, depending on what you invest in, a good target to have would be high single digit returns. If you can achieve double digit compounded growth yearly, you should be managing a fund.
First you must have a target. Cuz once you have a target, you will strive for it.
As a beginner investor, i always advocate to be well equiped with investing knowledge 1st so that you wouldn't make alot of painful mistakes that others did. Eventually, you will have a good returns!
A more direct anwer would be 4-5%, there is a 'risk-free' return from CPF at up to 3.5% for OA and 5% for SA - so ignoring the illquidity of the above, you should be aiming for that. Also if you look at the historical returns of some of the blue chips or the STI index, 4-5% is definitely acheiveable even without deep investing knowledge
If you are investing in SG market, you should aim to beat the STI returns. Because if you cannot beat STI returns, then you know you should just buy STI ETF.
This applies to overseas stocks too. If you invest in US stocks, can you beat the S&P500 or Dow Jones returns?
I think it ultimately depends on your risk appetite. Risk and returns are directly related, when one goes up, the other goes up as well. If your risk appetite is crazy high, penny stocks allow one to double your money in a day, though the inverse is true as well where you can lose half your money in a day. But as a beginner, you must first understand your risk appetite before deciding on what sort of asset classes you would like to pursue in your investment journey
Before you start investing, it will be best to understand your objective. Here are some questions to help you:
What is your capital?
How will you want to invest your capital? E.g. lump sum or an amount on a regular basis
How long will you want to stay invested? E.g. 10 years
What is your risk appetite? E.g. How do you feel about short-term volatility?
What is your objective for investing?
Now, instead of looking at dollars and percentages, understand it from the perspective on what can you learn from this opportunity? When I first started out, I am always more enthusiastic to learn as much as I can and not to repeat the same mistakes that I have made.
Over time, I become a better investor in every aspect. =)
Here is everything about me and what I do best.
As long you are investing, and exceeding the annual inflation rate/ CPF OA rate circa 2-2.5%, you are already at a winning path. no need to fret, the most important thing to rmb is risk/returns are siamese twins. If you assume low risk, you cant expect (very low probabilty) to get market beating returns. As long you dont accept mediocre returns in exchange for bearing higher risk, should be fine in the long-haul
Anywhere from 4-8% is good for a start!
However, it is not something that you should be "expecting". After all, markets are volatile and returns are not always guaranteed.