One common reference point we can use is the current “risk-free” rate. In a UK context, this is often taken to be the yield you can get on long-term government bonds. It’s based on the assumption that the UK government is unlikely to default on its debt. So, the yield on a long-term UK government bond sets a baseline for the return we could earn without taking any risk. At the time of writing, the yield on a 20-year fixed interest UK government bond is hovering just below 1.0% p.a. – an all-time low.
