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.
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2 hours ago
Hi,
ReplyDeleteI 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.