Imagine if you were to earn an average of $36,000 a year ($3,000 a
month) for your entire working life of thirty years. This is
assuming you start working at age 25 after graduating from
university and retire at age 55.
The total income you would receive would be $1.08 million ($36,000
x 30 years). So the good news is that you would already be earning
a million dollars in your lifetime, without any help from me.
The bad news is that if you are like most people, you would
probably spend most of the money you earn and a whole lot more. You
would end up at the end of thirty years with nothing much left.
What If you were to just invest 10% of that income a month (i.e.
$300) into the US stock market Index and allowed it to compound
annually at 12.08%, how much would it grow to?
Using a financial calculator, you will find that $300 a month
invested at 12.08% compounded annually will grow to $939,106! Isn't
that amazing!
Just by investing 10% of your income, you get back almost all of
that $1 million which you earned in the first place. This is
possible because of the amazing power that compound interest
(returns) can have on small amounts of capital over a long period
of time!
And the best part is that it takes very little investment knowledge
to do this. All you have to do is to invest consistently in the
Index.
I know that some of you are probably thinking that you don't have
thirty years to wait to make your first million. You probably want
to achieve financial fre-edom within the next 10-15 years or less!
The great news is that with some hard work and the savvy stock
picking skills, you will confidently be able to achieve a minimum
of 15%-25% compounded annual returns on your investment.
To your success
Tuesday, February 26, 2008
Monday, February 25, 2008
Why you can't afford not to invest
When you mention the word 'investing' to most people, especially when it comes to the stock markets, reactions of caution and fear often arise. I have heard my friends or relatives say...
'I lost half my savings when the stock market crashed' 'Every time I buy a stock, it seems to go down.'
'I should have kept my money in the bank instead.'
'Investing is risky, you can lose your capital'
' Buying stocks is like gambling'
This aversion to investing is compounded by the fact that we were taught by finance courses, banks and financial advisers that 'high risk leads to high return'. In order to earn high returns, you must be a risk taker! And since most people don't like the idea of taking big risks, they never ever aspire to achieve high returns with their money. As a result of past painful experiences and well-intentioned advice from ignorant friends, many people have developed a phobia for investing.
They believe that 'investing is too risky' and 'it's safer to keep my money in the bank.' And so they resign themselves to earning measly returns of 2%-3% from their fixed deposit accounts. Consequently, they have lost out on one of the most powerful wealth building tools available, and the opportunity to retire young and wealthy. What's worse is that by not investing, these people actually experience the devaluation of their hard earned savings from the effects of inflation. Thinking they have saved enough money to retire comfortably after twenty years of hard work, they realize too late that everything around them has doubled or even tripled in price! Think about that $9 movie ticket that used to cost $3 in the 1980s. Inflation would almost guarantee that you will be paying more than $27 to watch a movie twenty-five years from now. Similarly, maintaining your home and a car would cost three times more than it costs today. Is your money growing as fast as prices are rising? By not learning how to invest, it is almost certain that you will end up struggling financially in your twilight years. That is what I call truly risky! Not investing really leads to 'high risk and no return'.
To your success
'I lost half my savings when the stock market crashed' 'Every time I buy a stock, it seems to go down.'
'I should have kept my money in the bank instead.'
'Investing is risky, you can lose your capital'
' Buying stocks is like gambling'
This aversion to investing is compounded by the fact that we were taught by finance courses, banks and financial advisers that 'high risk leads to high return'. In order to earn high returns, you must be a risk taker! And since most people don't like the idea of taking big risks, they never ever aspire to achieve high returns with their money. As a result of past painful experiences and well-intentioned advice from ignorant friends, many people have developed a phobia for investing.
They believe that 'investing is too risky' and 'it's safer to keep my money in the bank.' And so they resign themselves to earning measly returns of 2%-3% from their fixed deposit accounts. Consequently, they have lost out on one of the most powerful wealth building tools available, and the opportunity to retire young and wealthy. What's worse is that by not investing, these people actually experience the devaluation of their hard earned savings from the effects of inflation. Thinking they have saved enough money to retire comfortably after twenty years of hard work, they realize too late that everything around them has doubled or even tripled in price! Think about that $9 movie ticket that used to cost $3 in the 1980s. Inflation would almost guarantee that you will be paying more than $27 to watch a movie twenty-five years from now. Similarly, maintaining your home and a car would cost three times more than it costs today. Is your money growing as fast as prices are rising? By not learning how to invest, it is almost certain that you will end up struggling financially in your twilight years. That is what I call truly risky! Not investing really leads to 'high risk and no return'.
To your success
Saturday, February 23, 2008
Is Investing really risky?
Is it really true that investing is risky? The answer is... itdepends.
The risk in an activity very much depends on the level ofcompetence of the person doing that activity. For example, is it risky to drive a car? Well, if you have never gone for any driving lessons and have no idea how to read road signs, engage the gears or to use yourside-view mirrors, then there is a high chance that you could getyourself badly hurt or even killed.
However, if you have a thorough understanding of how to drive well,then driving is a low risk activity.Similarly, investing is risky when you don't know what you aredoing. The scary thing is that the majority of people who investtheir hard earned money in the stock market do not know what theyare doing. Many people who buy shares of companies have little or no knowledgeof how to invest. They are like that driver who has no clue abouthow to work the gears or the rules of the road. This is because you do not need to take a license or be qualified to be an investor.Just about anybody can do it!Most amateur investors do not even have a basic understanding ofthe economic cycle and how interest rates and oil prices affect theglobal economy & the stock market. They have no clue as to where and how to read financial reportsthat will impact the stock markets. Most have very little financial& accounting knowledge and do not know how to value the worth ofthe company's shares they are buying. In fact, I am often shocked when I hear of people who invest in acompany without even understanding what business the company isinvolved in, let alone understand the company's business strategy. In the highway of investing, over 70% of investors (mostly thegeneral public) are driving around without the basic skills ofmotoring! This is why many of them crash and burn their hard earned money.
For the majority of people out there with little financial competence, investing is truly high risk and maybe high return(depends a lot on blind luck). To me these people are not investorsbut gamblers. For such people, I would strongly advise them to learn how to driveor to leave their money in the bank or under their pillow!When you have a thorough understanding of the stock market & therules of investing, then investing is no longer risky! When youknow exactly what you are doing, you can achieve extremely highreturns, with very low risk!
To Your investing
success
The risk in an activity very much depends on the level ofcompetence of the person doing that activity. For example, is it risky to drive a car? Well, if you have never gone for any driving lessons and have no idea how to read road signs, engage the gears or to use yourside-view mirrors, then there is a high chance that you could getyourself badly hurt or even killed.
However, if you have a thorough understanding of how to drive well,then driving is a low risk activity.Similarly, investing is risky when you don't know what you aredoing. The scary thing is that the majority of people who investtheir hard earned money in the stock market do not know what theyare doing. Many people who buy shares of companies have little or no knowledgeof how to invest. They are like that driver who has no clue abouthow to work the gears or the rules of the road. This is because you do not need to take a license or be qualified to be an investor.Just about anybody can do it!Most amateur investors do not even have a basic understanding ofthe economic cycle and how interest rates and oil prices affect theglobal economy & the stock market. They have no clue as to where and how to read financial reportsthat will impact the stock markets. Most have very little financial& accounting knowledge and do not know how to value the worth ofthe company's shares they are buying. In fact, I am often shocked when I hear of people who invest in acompany without even understanding what business the company isinvolved in, let alone understand the company's business strategy. In the highway of investing, over 70% of investors (mostly thegeneral public) are driving around without the basic skills ofmotoring! This is why many of them crash and burn their hard earned money.
For the majority of people out there with little financial competence, investing is truly high risk and maybe high return(depends a lot on blind luck). To me these people are not investorsbut gamblers. For such people, I would strongly advise them to learn how to driveor to leave their money in the bank or under their pillow!When you have a thorough understanding of the stock market & therules of investing, then investing is no longer risky! When youknow exactly what you are doing, you can achieve extremely highreturns, with very low risk!
To Your investing
success
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