I started serious Investing Journey in Jan 2000 to create wealth through long-term investing and short-term trading; but as from April 2013 my Journey in Investing has changed to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

It is 57% (2017 to Aug 2022) to the Land of Investing Nirvana - Freehold Income for Life!

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

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Sunday, 12 December 2010

Compound Interest is not the same as Compound Returns (2)

Read? Compound Interest is not the same as Compound Returns

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (5)


Compound Returns of 2.6% by 100% re-investing may be far more difficult than you think

E.g. When you can afford to take a 20-year HDB Housing Loan at 2.6% but choose to take advantage of low interest rate and opt for 30-year loan and use that extra money saved for investment.

So what is the difference?

When you take a loan, you pay compound interest to the bank and the total interests payable is definite; but when you invest and re-invest for compound returns that is NEVER a sure thing that the compound returns over 10 years of market cycle of bulls and bears will definitely be more than 2.6%. Just one or two big bears over that 10-year market cycle may wipe off your part or all accumulated gain and resulted in negative or unfavourable returns.
Posted by Createwealth8888 at 20:39
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1 comment:

  1. Anonymous12 December 2010 at 21:24:00 GMT+8

    Hi,

    I beg to differ.

    If caught in a Bear Market, treat your capital as sitting in "Changi Hotel" - not really wipe out.It is only a wipe out if you are panicking and sell lock, stock and barrel.
    But, you have to wait, wait..... maybe until the cow comes home for another new market cycle.
    Ha! Ha!
    Nevertheless, a consolation is your dividend returns is usually at it's peak because almost all your remainder investment capital should be slowly DA into the market too.
    Such is the scary way to invest, if you have the stomach.
    If not you will vomit and sell everything.

    ReplyDelete

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