Let's have a bigger example. Consider that a household accumulated savings of S$500k, which probably could be accumulated by some of you, the aspiring readers reading this now, or roughly speaking the top 10% households in Singapore given that their annual household income probably exceeds S$150k, ie this amount can be saved in less than 10 yrs.
So giving this amt the higher return of 8% would give income of S$40k per yr. Now we are getting to something. S$40k could probably pay for most expenses like food, mortgage, utility and phone bills etc. But not the extravagant stuff like a Europe tour, or a nice 1.8L car which today (2012) costs *gasp* a cool S$100k.
So my point is: investment can give you incremental income (S$400 in the first example), if you invest as well as an average investor on Earth. And if your base is big enough, ie S$500k, it can give you some maintenance income, but nothing more. Kid's education, insurance, medical bills and Inflation, the biggest killer - these are things that are not factored in the S$40k maintenance income that we talked about.
And as it is, 8% return every year is quite a high target over long investment horizons of 20-30 years. Very few professional fund managers actually achieve 8%.
So, contrary to what banks, brokers and most financial advisers would advise, investment cannot help you grow your wealth to make you eligible for private banking overnight. Next time you want to gauge the knowledge of the sweet young relationship manager peddling another structured note, ask her what she thinks is a likely return target over 20 years. The answer is 5-8%. If she says anything higher, leave immediately. Well you should still leave even if she got it right since most structured products don't help you make money. Unless she looks like Cecilia or Anne Hathaway :)
Investment cannot make you filthy rich. Over a long period of time, like 30-40 years, it might get you a good retirement nest, if we do things right and get that 5-8%pa over the long run. The easiest way to do that might be simply buying ETFs, or exchange traded funds that allows you to buy whole markets with minimum fees.
To achieve more than that, ie to invest and get 10-20%pa over say 20-30 years, you need to put in a lot of work into analysing macro trends, industries and stocks. It's a full-time job in itself. It might actually work out better to focus on your day job and do it better and get that General Manager position.
However if your last name is Buffett (not Buffet as in-eat-all-you-can type one hor), the story turns out to be quite different. You would have made 25% annual return on your investments for the last 40 years and earned US$30bn. Your "incremental income" on investment would have made you the 2nd richest man on Earth (after a certain Gates who likes to build Windows with security holes) and you will be the only guy in the Top 10 Richest People List that have made your money through investment. Too bad most of us are Lees, or Tans, or Ngs.