As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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Welcome to Ministry of Wealth!

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

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down

Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Tuesday, 13 October 2009

The Compound Magic Of Stock Transaction Timing

The Truism in the Stock Market - Stock Prices Fluctuate!

If stock prices fluctuate wide enough then you can apply the compound magic of stock transaction timing and make compounding gain out of many short term trades.

Is psychological barrier holding you back or lack of knowledge and skills?

Knowledge and skills can be acquired through learning and actual life experience.

If it is due to psychological barrier, then probably you may have to go up to Bukit Timah Hill every weekend to seek the inner strength to break through.

The most dollar in the least time

Let says some one told you that he has doubled his investing capital. That good. But, what if he told you that he took 10 years? Not bad. His yield is about 10% per year.

But, another person told you that he has doubled his investing capital in 2 years. That is really good. His yield is about 50% per year.

You see the difference. The most dollar in the least time. We should be measuring the investment yield in terms of profit per unit time over our entire investing life cycle.

To understand "The most dollar in the least time", you first need to understand:

The rule of 72 and long term returns

You might not have learnt this at school, but Einstein’s rule of 72 is one of most magical and simple formulas around. What this says is that to work out how long it takes to double the value of an investment, you simple divide the return into 72.

To estimate how long it would take to double you money on an investment just divide 72 by the percentage rate you are earning on your investment; and that's it.

For example, if you have a savings account with $500 deposited in it. The rate of interest is 4% per year. So the doubling point, the length of time it will take you to double your $500 to become $1,000 is: 72 divided by 4 = 18 years.

If the rate of interest were 6%, then the doubling point to be 72/6=12 years.

Well and good in theory, but we still have to get our hands dirty to do it.

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