The broader Bursa Malaysia and Singapore Exchange (SGX:S68
) , on the other hand, have vastly underperformed. Total annual compounded return (including dividends) for the FBM KLCI (largest 30 stocks by market cap) was only 2.34% on average — worse than FDs, which earned compounded annual returns of some 2.8% over the 10-year period — while the broader FBM Emas Index fared marginally better, with compounded returns of 3.09% per annum. Over the same 10-year period, the Straits Times Index (STI) recorded an annual compounded return of 3.68%, better than Singapore dollar FD returns of 1.1% per annum, but certainly well below returns from US stocks. Of course, past performance is past. We don’t know if the strong US stock gains can be repeated.
People often ask us what they should do with the small savings that they have. Most have been rolling the money over in bank fixed deposits (FDs) but are increasingly worried that rising inflation will erode the value of their savings. Are there better options to earn higher than the FD rate of returns? So, we did some research. And for the first time, we have ended with a simple, actionable conclusion.
Historically, investing in equities has proven to be one of the best ways to grow your retirement fund over time. US stocks have been among the best-performing in the past decade. Total compounded returns for the S&P 500 index exceeded 12% annually, on average, over this period. A retail investor (with limited capital) could easily invest in one of the multiple exchange-traded funds (ETFs) that track the index for minimal management fees.
