The Why’s and How’s of the 6% Post Retirement Investment Return*

Throughout this module I only use a conservative 6% per annum return, compounded over the years. Why?

It is the yardstick for real estate investment – 6% rental income yield, at minimum.

But today, I will show you exactly how to confidently get 6 percent or more from your investment even during downturn. No bold promises of huge return, just very down to earth rate of return which makes sense. Reinvest this absolute amount during downturn, and pave the way for capital gain when market bounces back.

Another thing I want to mention, before you watch the video below, is average return.

You CANNOT just take the average historical return of the stockmarket or a unit trust fund over a period of time to use as your assumption in your retirement planning/management.

For example, if the market is up by 30% this year and then down by 10% next year, can you assume that your average return is 20%?

Hell NO. Your return is 17% instead, by using the absolute value of return. Here’s how:

You have $1,000, with 30% return, you will have $1,300. Then, you lose 10%, your money will go down to $1,170

So over a period of 2 years, your return is 170/1,000 = 17 percent.

Seemingly small percentage different like this make huge difference when compounded over a long period of time.

Here’s another analogy, for the fun of it:

If you are a man, suppose I kick you in the groin now. The impact lasts 2 seconds. The pain will be excruciating right?

Now imagine that impact is averaged out over a period of 24 hours. It is like a gentle touch (by your wife or girlfriend, hopefully) every single hour for 24 times.

Click on the below article to Enlarge (Don’t squint your eyes!)

reit-stewartlabrooy JUL16


Side note: No investment or financial instruments are totally commission free. We can only minimize it, but not eliminate it. In this example, we have not take into account the brokerage fees when you buy/sell the stocks. It could range from 0.05% to 0.6%, depending on brokerage and your transaction size. Take this into account too when computing your absolute returns. The worksheet attached already has the columns for you to fill in your investment-related expenses which would effectively reduce your total investment income.


This is not an invitation to buy or sell. The ideas expressed above are best-effort simulation. Any action that you take as a result of the analysis above is ultimately your responsibility. You may want to consult your investment advisor before making any investment decisions.

Bonus Video:

Previously, I conducted an interview with Mr Lai Seng Choy, the author of the book titled Freedom. This interview is about an hour long, talking about mindset and how he manage to retire earlier than his intended age of 45 years old.

I put this video here too is because of his unbiased view on REIT investment as an income-generating instrument. Skip to 39.30 mark to listen to this.

But I’d say the whole session is worth listening a few times over.


  • choong

    Reply Reply January 19, 2013

    I have invested in REITS and have been getting quite good capital gains on top of the 6-8% distribution. For retirees, what percentage of our total funds would you suggest to be invested in REITS?


    Reply Reply January 19, 2013

    Hi Choong, this is hard to answer without considering your other investments type and exact amount. Do you have unit trust investments? Other stocks? Rental income? How about their returns? You could email me for a more private discussion should you need a second opinion (because I believe you are more wiser than me, even, when it comes to managing your own money)

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