The Power and Secret Of Compounding

22 Jul

Posted by xBrain as family

Pakcik Tua Memandang Langit

I am Old But No Savings In Bank Account

This phrase always being said and heard. Like the old man in the picture is one of the Beca owner in Kuala Terengganu. In his mind he might been thinking about his future. No surprise that he managed to give the proper education for his kids and none of them is a college dropped out.

Believe in the Power Of Compounding

Albert Einstein always the great inventor and he came out with this quotation :

Compounding interest is man’s greatest invention

So learn from that quote can make you richer than now. Do you believe in this quote? Let do some simple math :

Age : 20

Monthly Saving : $100

Time Span : 120 months

Interest Gain Annually/Year : 10%

So after ten years; 30 years old the money will become : $21,037.40

Compare with this :

Age : 25

Monthly Saving : $200

Time Span : 60 months

Interest Gain Annually/Year : 10%

So after ten years; 30 years old the money will become : $16,117.46

See the difference when you start with a minimum amount but longer period?

Start Saving On Early Age

This compounding rules will become effective when you start to save on early age. Compounding will take years to matured. So just imagine how great is the compounding effect. “Time” is the only secret of compounding.

Some people tend to force themselves to take insurance with the saving package. My personal thought is, saving link insurance did not perform better on the long term. Just imagine how much the insurance can give back the return in within a year?

Do calculate it in percentage, not the amount

We made mistakes by calculating the return amount by numbers not by percentage. Yes it’s true that you will earn more money investing in saving plan insurance but do you know the fact that it’s better for you to invest in another higher percentage in return compared to the insurance.

The insurance agent is the most sweet talker person in town. Don’t fall for that trap. Most of the insurance company can’t provide you with the best number if compared to the unit trust such as ASB, ASN, ASW, or Public Mutual or CIMB Wealth Advisor. A lot of better fund for you to start to invest.

5 Check List Before You Start To Invest

Prepare savings at least 6 months of your monthly income - In case you lose your job
Find the agent who invest their money in the same fund - This is the right person to give advice
Invest with the amount that you can afford to lose -Are you ready to lose?
Prepare for the worst case scenario - Anything can happen to your investment
Register your beneficiary -In case you die

*Picture Courtesy of : Wedding Photographer Malaysia

Thaven

July 24th, 2008 at 9:06 am
1

Hie.. dnt agree on ur statement that Insurance doesnt gives you accurate figures. Did you know that putting in Public Mutual or other Gov based Funds is also not stable! Insurance besides giving you the compunded interest, will also provide you with the Protection. Does other Financial company does this? In Insurance you are protected and your money are protected!
azrin

July 24th, 2008 at 10:47 am
2

yeah bro..we lost our jobs with no paycheck and liabilities to our names, what does that give that??

Best to stick to your Gold and Forex.
BTW,get to me. We have issues to sort.
Ades

July 24th, 2008 at 11:50 am
3

And it is (i.e interest) is the greatest of sins in Islam! In the Quran Allah said only two times “I will wage war on you…”, and one of them was targeting people who deal with interest. Can you imagine fighting with Allah?

More info here
xBrain

July 24th, 2008 at 2:24 pm
4

Azrin –> Yeah it’s a big mistake to believe in outsider then local. It’s a tough and expensive lesson for both of us. After a lot sweat and effort, there was no remuneration. Too bad I think.. I will call you mate.

Ades –> Look at this way. The post is about compounding magical formula to gain what ever it desired. In Islam, we normally replace the interest term with Profit. This is what I got from the Al Rajhi Staff In Taman Tun.

The interest instrument is the Jews strategy to put us in sin all the way. In fact if you are looking at all the Bank Institution in Malaysia; most of them are practicing the interest. So what option that we had?

1) First open an account with AlRajhi Bank not Bank Islam as Bank Islam is not practicing the real Islam way of trade and life.

e.g : If you are taking personal loans with Bank Islam, then you will signed an agreement that they will buy let say computers for you. But the reality is; try asking them rather than you take the money can you take the computers? They will say a big NO NO. This shows that there are no buying and selling transaction being held. This is not the right way to do it right? With Al Rajhi you can select to receive the things that the bank bought on behalf of you instead of cash.

2) Put all the money in the house? It’s hard to do that rite? What if our home being broken and the money being stolen?

3) Don’t take any loans or credit card due to the interest charged by the Bank. It is hard too

4) Buy insurance from Takaful provider. But how clean is their transaction? I doubt that the Takaful insurance is still the same with the conventional loan.

5) Buy Syariah approved stocks and Unit Trust? Syariah committee in Malaysia failed to meet the standard in Malaysia. Try scanning all the listed stocks and unit trusts approved by Syariah, then carefully study where the fund being invested. You will get what I mean.

I am fed up with the ruler in Malaysia. They love to promised good things to us but at the end of the day, they repeat the same mistakes over and over again.

I hope one day the real Islam leader will lead this country and we as the rakyat will obey to what being said and asked.

I am so sorry if this post hurt the feeling of yours but I write it to explain about the compounding interest and can be called as compounding profit as well. I would loved to see that people practicing what the Qoran said.

Cheers
xBrain

July 24th, 2008 at 2:28 pm
5

Of before I forget, Al Rajhi Bank fixed deposit product is using compounding profit sharing. So far to be proven the best investment instrument in Malaysia. Profit rate calculated by monthly basis and it will be compounded for the next month profit. Previous rate about 4.00++%/yearly.
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