Friday, August 09, 2013

Compound Interest

If you have RM10,000 to invest, where should we place them 'safely'?

Compound interest

1% : it takes 70 times to double. So, if we put it in an investment at 1% interest, it will takes us 70years to double. Inflation is higher than that. So, it is very unwise. But, if it is 70months, that is we are able to increase it by 1% per month, that is great. 70months is about 6years.

2% : it takes 35 times to double. No one will like to place their money in FD if they are giving us 2% per annum, it will takes us 35 years. Placing it per monthly, 35months is a very fast pace of doubling our capitals, about 3years time.

3% : slightly less than 24 times to double our capital. So, this will be my realistic target per month in trading, it will takes me 2 years to double the capital.

4% : slightly less than 18times. Our FD rate is still below 4%, so placing our money safely here will takes us 18years!!

5% : less than 15 times now. Bonds paying 5%?

6% : slightly less than 12 times. So, we could double our EPF around 12 years?

7% : slightly more than 10 years to double. This is where my 10% of my income goes to ... Saving in ASB.

10% : do the math ...

RM10,000 flip two times becoming RM20,000 and that another round of flipping becoming RM40,000.

2^10 is 1024. That is RM10,000 into RM1.024mil.

Dream on, but compound interest is the 8th wonder of the world.


1 comment:

wei chong said...

If interest got that high, inflation also not far away. Haha. Look at the value of Rm50 right now, it is barely enough to have petrol full for standard sedan car.