Wednesday, 14 May 2008

The Power of Compounded Interest

The power of compounding interest… always regarded as the best option to grow the retirement nest or children education funds but yet always neglected by younger folks.. Why many said so.. While I am in a unit trust industry, I always met older professional folks from every background which having a stash of money either in EPF or their own saving portfolios. They always quoted and saying I am lucky enough been surrounded with sound investment knowledge at younger age… :) Not like them which felt isolated with investment knowledge and options until reached middle age. Yes, how lucky but it’s not as easy as ABC.. Knowledge without application always lead to disruption.. and spoilt.. OK.. back to the topic.. The power of compounded interest can be like this – You keep investing a pre determined amount of money into investment vehicles (unit trust funds, ASB and fixed deposit) every month, reinvest the return at the end of financial year for a specific long term period.. The principle amount invested plus return every year will grow your money excessively in longer period.. So, the younger you start, will be better and more opportunity and visibility for your money to grow bigger.. Example, a young executive, at 25 yrs old who set aside RM100 every month at the beginning of every month at dividend growth of 10% per annum until age 65, his investment would have grown to RM638,000!, That is a huge money compare with only RM100 sacrifice every month. The key element to compounding is time. The longer the period of time, the greater the growth.. :)

No comments: