Saturday, February 09, 2013

Invest : Growing our money

Morning ... it is CNY eve ... I was listening to Chee-Wah's clips and this 'investing' clip is very interesting

I started to read Robert Kiyosaki's RDPD and then Cashflow Quadrant about 8 years ago ... 3 years before I am into KLSE. I started with doing some keropok-biz ... failed and came into stock-markets ... and doing very well now.

8th wonder of the world : Power of compounding

If we have saved the money since kinder time ... no need to go to school ... and continue to save the money ... till Uni time ... and save all the money ... to INVEST ... and with the compounding effects, we all could retire young!! What he said ... sounds 'logical' tho he is joking.

But ... investing is risky. What instrument(s) should we be investing for 30 years ... giving a consistent compounding interest? And with inflation rate, we should get compounding interest rate higher than the inflation rate. Logical?

Assuming that we could save 10% of our salary per month. Assuming our salary is RM4k(that is what average lecturers' salary). So, we are saving RM400.

By placing in banks(saving account or FD) is NOT a good choice. The inflation rate will eat-up or even higher that the interests we obtained.

So, what is the best investments in town? Buying Unit Trust or whatever investment-linked products may not be wise too ... as we are paying too high of fees to those agents etc etc. And they will not pay us high rates!!

One of the normal investment is buying a 'house'.

Another is stock-market!! Our own KLSE. Well, many good companies actually giving good dividends, which more that the banks rate. But, the risk of stock-market is there, of coz. Is that really so? Actually, the risk is managable ... it is just that many do not have the knowledge and wanting profits in shortest of time. Greed in play ...

Stock-markets giving me good return. Assuming a 10% gain in a year, and using our RM400(per month) and compound it for 10 years ... that is a lot of money. Assuming that our salary increases by 5% in a year ... and we are given 1 month bonus, which we place into our investment too. That is a lot.

An amount of RM10, 000 is compounding 10% per annum for 10 years ... the rate is (1.10)^10 = 2.593, and RM10k becoming around RM26k!!

Something to think about ...

To achieve a consistent 10% growth for 10 years is certainly not easy. While my ASB giving me around 7-8% interests ... where my 10% of salary being placed there. With the increase in salary, we should increase our savings/investments.

Something for me to ponder on ... and adjust my investment portfolio.

Another 3-years to come, I shall have done that for 10 years, and will use the money to get a landed-property. I am thinking of a place in RRI(Sg Buluh) as it will be a growing place in 15 years to come. While I have managed to get this apartment a yr plus for a good under-market value(RM155k ... now selling at RM220k) , I could always sell it off(or rent).

That is why we should be financially-educated. From how to increase our salary, increase our imcome ... reduce our expenses(being frugal) ... increase our savings ... grow it in years ... with patience ... and continue to look for opportunities ... we will one day manage to leave 'financially free'.

Do not use credit-cards if you are not discipline enough to pay off in total the balances on time.

Hope to write in length on what I have learned so far about growing our money ... and many young ones will be inspired to be determined to get their financial in good shape.

Gong Xi ... Fa Cai.


1 comment:

alan young said...

Hi Teh,

Happy Chinese New Year Greetings to you...would you like to exchange