Investing 100k and getting back 500k is not a difficult task. The most important thing missing from the equation is the time period. Let me illustrate this with a few scenarios. Since this is an early retirement blog, I will start with the longest time period, and then working backwards to see how we can get that 500k much faster.
Scenario 1: Long waiting period
If your time period is long, then simply putting your 100k into a financial instrument such as the special accounts in your CPF will get you 500k after 55 years, without any additional investments or payments. This is the pure power of compounded interest at work. See the table below to see the assumptions made in coming up with the number. If you want to play with the inputs, here is the link to the investment calculator:
Scenario 2: Mid waiting period
Let’s say 55 years is too long a time period. So, let’s try to shorten that period by finding investments that give us double the interest rate from 3% to 6%. This effectively cuts the waiting period in half, going from 55 years to 27 years. The goal here is to find investments better than what our cpf is giving us. That is why I have been looking at alternative investments such as Singapore corporate bonds, and Singapore REITs. These investments are able to provide 5-8% returns and they are worth taking a look.
Scenario 3: Short waiting period
If you want an even faster investing period, then we are looking at high yield investments that can give you 16% per year. With compounding, you can expect to hit close to 500k within 10 years. However, finding such investments is rare. This is why I am buying income producing websites because that are the only asset class that I know which produces such returns.
So, depending on your investment period, there are a wide range of investment options that you can consider. If you are young, I advise you to think of taking the riskier option as any mistakes made can be recovered over time. However, if there are no mistakes, then expect to reach early retirement sooner than most.