Useful Knowledge

Compounding vs Procrastination

Posted on May 9, 2008. Filed under: Useful Knowledge |

 

Great videos, using simple illustration to show us the power of compounding interest vs the cost of procrastination.

“the most powerful force in the universe is compound interest” – Albert Einstein

 

(the following video is a “silent” clip. Do pay attention to the wording shown at the bottom. It is informative)

 

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When will $$ double from an investment – Rule of 72

Posted on April 14, 2008. Filed under: Useful Knowledge |

If you’re managing your own portfolio investment, it is vital that you know the Rule of 72. It is a simple but effective calculation for you to estimate when your money will be doubled.

For eg, if you want to double your money within 5 years. Do you know what is the rate of return that’s needed annually to achieve this? Here’s how the calculation works:

72 / A (years) = B % (interest)

72 / 5 = 14.4%

So the question is could you find any investment tools that can give you consistent net returns of 14.4% per year?

Knowing how this Rule of 72 is applied, it would be interesting to see that it takes 20.5 years for the FD to be doubled  (FD rate: 3.5%):-

72 / B % (interest) = A (years)

72 / 3.5 = 20.5 years

I guess not many are aware of this rule. If not we wouldn’t have billions of FD savings in our banking system in Malaysia now!

Mind you, the same rule is useful if you also want to know how fast your debt will be doubled! So just imagine with your credit card interest rate of 18% a year, it will only take 4 years to double your debt.

Hope by now, you know that choosing only the proper investment tools with the needed returns will help you achieve your investment targets  in your set time frames. Oh, and yes.. avoid delaying to pay your high interest debt. 🙂

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