HOW QUICKLY EVALUATE AN INVESTMENT USING THE RULE OF 72

Rule of 72 is a basic investment rule that estimates the amount of time it will take to double your money. It is generally used as a simple and straightforward method for estimating an investment's doubling time or halving time.

How to apply the Rule of 72

These rules apply to exponential growth and decay respectively, and are therefore used for COMPOUND INTEREST as opposed to simple interest calculations.
Years to double = 72 / Interest Rate
Take the percentage of interest on your money and divide it into 72.
For example, an INTEREST compounded at 9% percent would double in eight years (72/9 = 8).
If medical fees increase at 8% per annum, the "rule of 72″ gives 72/9 = 8 years later, your medical bill will double; an exact calculation gives 8.0432 years. After another 8 years, you will need to pay 4 times of the medical bill compared to present situation.
When your unit trust consultant told you that a particular fund gives 100% return in 6 years. You roughly know that the fund's annualized 72/6 = 12% return per annum.
If inflation rates go from 2% to 3%, your money will lose half its value in 36 or 24 years.
A share you bought 8 years ago is only worth 1/4 of its previous value. Using rule of 72 twice, the share shrinks at a rate of 18%p.a. (For the initial 4 years, it falls to half of its value. Wait another 4 years, it falls further to only a quarter remaining)

When to use the Rule of 71, 70 and 69.3

The rule of 72 provides a good approximation for annual compounding, and for compounding at "typical rates" (from 6% to 10%). But there are situation where other rules will give more accurate answer.
low rates - for lower rate than 6%, Rule of 69.3 will give a better result than Rule of 72.
daily compounding - Since daily compounding is close enough to continuous compounding, for most purposes 69.3 - or 70 - is used
higher rates - a bigger numerator would be better (e.g. for 20%, using 76 to get 3.8 years would be only about 0.002 off, where using 72 to get 3.6 would be about 0.2 off). This is because, as above, the rule of 72 is only an approximation that is accurate for interest rates from 6% to 10%. Outside that range the error will vary from 2.4% to ?14.0%. For every three percentage points away from 8% the value 72 could be adjusted by 1.

Millionaire's Estimation

Felix's Corollary provides a method of approximating the future value of an annuity (a series of regular payments), using the same principles as the Rule of 72. The corollary states that future value of an annuity whose percentage interest rate and number of payments multiply to be 72 can be approximated by multiplying the sum of the payments times 1.5.
As an example, 12 periodic payments of $1000 growing at 6% per period will be worth approximately $18,000 after the last period. This can be calculated by multiplying 1.5 times the $12,000 of payments. This is an application of Felix's collorary because 12 times 6 is 72. Likewise, 8 periodic thousand dollar payments at 9% will result in 1.5 times the $8000, or $12,000.

The millionaire's estimation is a simple savings calculator, posing the question "How much must I save per year to have saved $1,080,000?" Of course, the annual interest rate is a factor. In the original challenge, the number $1,080,000 was chosen due to its multiplicative relation to the number 72.

Using Felix's corollary, one can estimate that by saving two-thirds of the total, in periodic deposits, the interest will take care of the rest (since 1.5 times two-thirds will equal the desired goal). So the goal becomes to set aside $720,000 in equal periodic deposits, such that it grows to approximate the target amount of $1,080,000.

If you want to be a millionaire in 12 years, just save $60,000 a year in an investment vehicle that gives you 6% a year. If you want to be a millionaire in 6 years, just save $120,000 a year in an investment vehicle that gives you 12% return per annum.

Summary for Action

The 'Rule of 72′ is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. I bet you don't want to bring your financial calculator wherever you go. Just apply the Rule of 72 to quickly make a rough estimate of a particular investment. Try estimate the route your friends or family member can become a millionaire using the Felix's Corollary and the Rule of 72.

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How Does Withdrawing EPF Affect Your Retirement Fund?

EPF was started for the sole purpose of forcing employees to set aside a certain percentage of their income for their retirement. It was generally perceived that if the contributions were to be used for other purposes, this would have a detrimental impact on the size of the retirement nest egg.
However, using these contributions to finance outstanding housing loans is also another form of long term saving as the property is likely to appreciate after the mortgage is settled.

How Does Withdrawing EPF Affect Your Retirement Fund?

If contributors withdraw their EPF for housing purposes, they will in turn have fewer funds for their retirement. However, at least they can be sure that they have roof to live under. For now, property is affordable in Malaysia, but one never knows what will happen to the property market in the future. Looking at Korea and Taiwan, it is almost impossible to own a home at big city if you are not rich.
The move to allow withdrawal of EPF to finance housing loans is a new one, which would benefit about five million active EPF contributors. Contributors who previously found it monetarily tight to buy a property can now consider doing so with this new withdrawal scheme.
This way, some contributors would be able to own better houses and yet be able to lessen their monthly financial obligations.
Contributors who are currently homeowners and are paying mortgage can also experience better cash flow as less money is spent out of hand for the loan.
This new withdrawal scheme is also good for those who know how to manage money. They can use this facility to grow their wealth. For instance, consumer debt in the form of credit card loans, personal loan can be paid off; they can invest for better return or even fund higher education.
However, for those who are financially illiterate, more money equals more trouble. They will spend for instant gratification without thinking of future needs. This may cause a social problem in the future when retiree has inadequate funds to live on.
Suggestions to channel EPF back to your retirement fund
Since you are reading this blog, I bet that you are amongst those who want to take advantage of this withdrawal facility and grow your retirement further. Here are 5 suggestions to channel your EPF money back to your retirement fund:
1. BUY UNIT TRUST FUND that will outperform EPF (5% currently) – by applying rinngit cost averaging strategy2. Pay towards the principle of your housing loan, thus shorten the loan tenure and save on interest charge.

mdsulaiman1@yahoo.com.my
013-7556776

DON'T SPEND THE MONEY YOU DON'T HAVE, TO BUY THE THING YOU DON'T NEED, TO PLEASE PEOPLE YOU DON'T LIKE

Do you find yourself spending more than you earn? Yet when you look back, you find that you actually spent that money on something that you could have done without. Worse still, you spent that money on someone you did not necessarily have to please.How can you avoid spending the money that you do not have, thus reducing incidences of overspending? Read on to find out.

10 Examples how you can overspend unnecessarily

A fresh graduate decides to buy an imported Japanese car. As a result, he uses up 50% of his salary for the monthly installments, car maintenance and petrol. He is then left with another 50% for his other commitments and expenses.
1. A fresh graduate decides to buy an imported Japanese car. As a result, he uses up 50% of his salary for the monthly installments, car maintenance and petrol. He is then left with another 50% for his other commitments and expenses.
2. You impulsively swipe YOUR CREDIT card to pay for the latest Apple laptop you always had an eye on. At the end of the month, you find that you are unable to pay the amount due.
3. Your colleague just moved into a semi-detached house. You sold your entire investment portfolio and existing apartment, took up a bigger MORTAGE to buy the house next to his.
4. An office lady uses her entire month's salary to buy the Louis Vuitton hand bag, just because her colleague shows off one to her.
5. You want your boy friend to propose only if he presents you with a Tiffany's ring.
6. A father took up a personal loan of RM10,000 so that he can take his family for a vacation to Australia. Although he did not need to take this holiday given his financial situation, he did so because his neighbour just came back from New Zealand.
7. Have a breast implant to impress the man you are interested in although he is not interested.
8. You bought an expensive set of home theatre system. However, you rarely watch any DVD at home since you are too busy at work. It is just to impress your friends who visit your house.
9. Bought a Rolex watch during your trip to Switzerland just because your boss said that it was a great investment.
10. You spent lots of money on your wedding ceremony and serve the best food, although all your wife wanted was a honeymoon in Europe.

What is the money you don't have?

Credit card - If you can't afford to pay it in full when the charges is due, it is the "future money", not "current money" that you already have
Mortgage - you use the bank's money to buy a house and stay in it, as long as you are able to pay it back to the financier.
Personal debt - getting a personal loan to spend on something is the stupidest thing to do.
Loan shark - those who don't have CREDIT CARD without proper documents to borrow from banks will look for "favours" from LOAN shark.
Easy installment plan to purchase consumer product
What are the things that you don't necessarily need?
Car, a plush house, gadgets and other things that do not fall within your budget. The rule of thumb is to spend less than one third of your income on these items.

Who are the people you don't like?

Friends, colleagues and relatives who like to show off,
those who look down on you, those who slap you on the back.
You can have a thousand reasons to hate and dislike somebody, but you don't have to hurt your wallet.

Have you ever done something like that?

We sometimes, unknowingly, spend money on instant gratification, only to regret much later. We sometimes also give in to our temptations to buy things that we don't have much use for or things that are impractical.
The next time, before you decide to blow YOUR CASH on something, try to think about how many hours of toiling at work that money equates to. This does not mean you need to stinge on everything that you wish to buy. Only buy something if you really need it.
Although this may sound like easy advice, we always end up faltering. We spend more than that we can earn and in the end, find ourselves struggling to make ends meet.


LOOKING A BETTER PLACE TO SAVE YOUR HARD EARN MONEY?

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013-7556776

Pendapatan Tetap & Persaraan

Kadang-kadang kita rasakan pendapatan hari ini boleh menampung perbelanjaan kita untuk hari-hari mendatang. Memang ada kebenarannya .Tapi kalau pendapatan kita sekadar cukup bulan habis belum tentu menjamin kita bila bersara nanti. Katakan bila bersara nanti kita ada EPF RM 100 ribu dan sedikit simpanan RM20 ribu sebenarnya masih tak cukup jika kita teliti untuk 20 tahun akan datang. Anak sekolah dah habis belajar ke belum? Rumah dah habis bayar ke belum?

Ada terdengar juga kawan-kawan untuk buat MLM untuk mendapat pulangan yang berterusan dan konsisten. Akan tetapi kita perlu ingat MLM dan pelaburan persaraan adalah berbeza. Tidak salah jika membuat perniagaan MLM untuk mendapat keuntungan bulanan dan melaburkan sedikit dari keuntungan untuk persaraan. Saya menyarankan anda yang buat MLM secara fulltime buat pelaburan untuk jangka panjang sebab tiada potongan KWSP lagi.

Untuk pengetahuan semua melalui siaran biznews TV3 yang lalu , telah mengeluarkan laporan kajian dari sebuah bank terkemuka yang mana 76% peratus daripada penduduk Malaysia tidak bersedia untuk persaraan. Adakah kita mahu nak termasuk dari statistik ini? Fikirkanlah... Adakah pada usia 55 tahun akan datang kita masih kuat untuk bekerja atau terlantar di rumah. Jika kita tidak berupaya , wang persaraan kitalah yang akan membiayai rawatan kita.Itu kalau ada, kalau takde??

Fikirkanlah secara rasional berapa kos perubatan sekarang? Berapa kosnya akan datang?

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Talian hayat : 013-7556776

Umur & Masa

Pada saya masa itu sangat penting ... Kepada sesiapa yang masih mencari sumber pendapatan alternatif dan tiada had bolehlah melabur dalam unit trust.

Kenapa sekarang?
Pada ketika ini kita punya masa mungkin anda berumur 25 tahun dan simpanan KWSP anda mencecah RM25 ribu.Umur persaraan anda pun masih jauh lagi 30 tahun tu...Jadi anda perlu rebut peluang dan kalau kena pada masanya harganya pun rendah. Kalau dikira anda boleh melabur RM8 ribu X 20% = RM1600 untuk kali pertama.

Bayangkan RM1600 X 4 kali setahun = RM6400 .
Harga beli seunit RM0.25
Kita akan dapat sebanyak 25600 unit.
Dan kita biarkan pelaburan kita selama 3 tahun dividen yang diberi RM0.015/unit
Harga tahun kedua RM0.27
Tahun ketiga RM0.28 ,
Tahun keempat RM0.30

Kita akan mendapat 28459.57 unit saham apabila setelah pembayaran dividen pada tahun ketiga.Jika kita nak keluarkan pada tahun keempat kita akan mendapat 28459.57 X RM0.30 = RM8,537.87

Kalau dikira keuntungannya (RM8,537.87-RM6,400)/RM6,400 X 100 =33.40%
Average keuntungan setahun 33.4/10 = 11.13% setahun .
Lebih tinggi dari KWSP beri pada tahun lepas 5.8%.

Oleh itu rebut peluang . Jangan tunggu orang dah untung baru nak mula..
Ini kerana kita rugi masa dan umur kita..

Pesanan ikhlas ..
Untuk penerangan lebih lanjut hubungi :
mdsulaiman1@yahoo.com.my
013-7556776

Pengawal Keselamatan Bank

Minggu lepas selepas masukkan duit dalam sebuah E bank di Century Garden JB saya berjumpa pegawal keselamatan yang bertugas di situ sebelum saya balik ke rumah. Saya berkenalan dengannya.

'Pak cik dah lama kerja kat sini? ' saya bertanya.
'Dah lama' jawabnya.
'Sebelum ni kerja kat mana?' ,saya tanya lagi
'Kerja kat MSC 15 tahun sebelum tu kerja kat S'pore' jawabnya.
'Cik umur berapa sekarang dah pencen ke? tanya lagi.
'Dah 3 tahun pencen.' jelasnya.
'Cik tentu banyak EPF pak cik , CPF (utk pekerja di S'pore) pun ada'. tanya lagi
'Dah habis dah buat renovate rumah, ini yang pakcik kerja untuk makan dan bayar rumah.' terangnya.

Mesej yang jelas dari perkenalan saya dengan pakcik jaga sebuah bank berkenaan menunjukkan wang persaraan tidak mencukupi untuk perbelanjaan setiap hari dan salahguna wang persaraan untuk baikpulih rumah.Seharusnya pakcik ini berehat di rumah waktu usia ini.

Jadi beringatlah dari sekarang kerana harga barang memang meningkat setiap hari. inflasi.inflasi

mdsulaiman1@yahoo.com.my
013-7556776

Persaraan & Anda

Ramai orang tidak mengambil berat tentang persaraan.Yang mereka tahu hanya bekerja untuk mendapat habuan setiap bulan.Bayar rumah, kereta, bil bulanan -telefon,astro,air dan macam-macam lagi..

Tidak merancang untuk persaraan...Bukan semua orang tidak merancang ada orang merancang tetapi jumlahnya sedikit berbanding dengan mereka yang membelanjakan wang habis setiap bulan.Mungkin tak cukup , anak ramai atau gaji kecik/ciput..Semuanya bergantung macam mana nak olah..

Baru-baru ini KWSP mengumumkan dividen 5.8% kepada pencarumnya. Bagaimana yang takde EPF atau kerja sendiri? Barang keperluan pada masa akan datang lebih tinggi dari sekarang!!!Perlu kita ingat.Akan tetapi walaupun KWSP memberi dividen 5.8% kita hanya untung 3.4% setelah tolak 2.5% inflasi tahun lepas.

Kini KWSP memberi kelonggaran mengeluarkan caruman akaun 1 untuk tujuan pelaburan.Ini adalah bagus kerana pencarum dapat mempelbagaikan portfolio kewangannya.Kelebihannya kita mendapat pulangan yang lebih tinggi purata 12-15% setahun , jika kena pada masanya mendapat lebih dari apa yang kita jangkakan.Jangan tunggu lama-lama masa tidak menunggu kita.Ambil peluang cepat kerana umur kita semakin pendek bukan semakin panjang.

Ikhlas dari mdsulaiman1@yahoo.com.my