When I posted about graduate couples having no problems saving \$1 million, I used an investment return of 3% in my calculations.

If you can consistently generate a 3% return every year, you will turn \$100,000 into \$103,000 in 1 year, and then make that \$103,000 become \$106,090 in 1 more year. With such compounding, your initial \$100k will become \$130k in 10 years, and \$175k in 20 years.

Suppose you can inject fresh funds of \$100k into the pool every single year. In 20 years, you will be holding close to \$2.7 million. But if you just save the \$100k every year and don’t invest, you will be holding just \$2 million (=20 x \$100k).

Ok, in reality, there isn’t an investment, or a bank account, that gives a consistent 3% year in and year out.

Instead, you see some people making hundreds of thousands in a single condo investment, and some making huge returns in the stock market.

These investment gains are often one-off affairs and usually take years to be realized.

But how do we compare our investment profits?

The following calculator tool provides a reasonable way to do the comparison. It calculates your investment return rate as if you had invested in something that gives you a flat return rate over the years. (The tool assumes you saved a fixed amount every year.)

For example, suppose you have been working for 10 years and currently have a total net investable assets of \$500,000. (You calculate your net investable assets the same way as you calculate your net worth, but exclude your stay-in property and car in your calculations.)

Let’s say you know that you made a net total profit of \$100k in investments over your working life.

So, you enter the values 500000, 100000 and 10 into the tool below. The tool calculates that you made a very respectable 4.9% return every year.

What is your calculated investment return rate?

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1. �Excellent blog with lots of useful information on financial

2. the secret is not to lose money. many people spend too much time buying and selling and forget to keep track of the overall net profit (or loss). they only focus on the profitable trades and turn a blind eye to their losses. this gives them a false impression that they are making good money.

it’s the net profits that matter!

over the 8 years of my entire “investing” experience, i have made 300k in net profits and now have \$600k in total net assets for investment. this is 19.2% return per year using the tool above.

when a financial planner tells me his funds generate good returns, i tell him to invest in my private fund. 🙂

3. “In reality, there isn’t an investment, or a bank account, that gives a consistent 3% year in and year out.”

Actually there is, just not in Singapore! My savings bank account in Germany gives 2,75%!!

4. that means locals here are shortchanged by the bullying banks. FT can start a “hedge fund” that gives a consistent 2% and earn on the 0.75% spread.

5. dontunderstand on

can anyone explain why singapore banks interest rate on sgd is so low???? how can they do that and get away with it?

6. Simple, because Singaporeans are sheepish and don’t stand up for their rights 😉
Seriously, SG banks can always claim that the Singapore market is small so they can’t give high interest. More likely is that the gahmen want to make CPF interest (also very low) look more attractive and banks want you to invest in stocks & bonds.
At least there is no taxation on savings here like in some european countries…

7. The older people will tell you interest rates of the yesteryears in sg were much more palatable. In the early eighties you would even see 8% offered for normal savings account. Banks now can get away with such low interests because singaporeans are stupid and don’t dare to fight for their rights. Just look around you- all indifferent apathetic disengaged people who just know how to complain but don’t dare to take concrete action.

8. Chelsey Young on

Managing your salary is important. Saving a part of it is a must to prepare for the future.