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Sunday, August 3, 2008

Rule of Compounding and inflation

How long it will take to earn the 1st pot of gold?

Current inflation rate is 7.5%

Using Rule of 72,

Suppose i be investing S$500 000, with compounding interest of 10%. the rule of 72 gives 72/ (10 + 7.5) = 4.11 years for my initial investment to double and offsetting the inflation. Do take note im assuming inflation remains at 7.5...which most likely will not be the case.

Qn how is it possible to maintain 10 percent or more returns from investment with this bearish mkt? We also have to consider losses.

Then again, how do i have this 500k in the first place? Haha.

Lets say, 1.5k a month, funds which you can throw away without heart pain into trading without regrets, a year equals to 1.5 x 12 = 18k. 4 years to double at 10 percent, 18 x 2 = 36k. 1 year returns will be 9k (36/4), equivalent to 750 additional bucks per month. Wooo...haha..not bad...almost 1/2 of the 1.5k per mth vested in trading. Haha..of cos... assuming no losses..no increase inflation.

Target...15% returns per year. Possible?

Start from small, build up my mental capacity. Like my mentor say, if you can't do 10push ups, how you going to do 100 push ups?

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About Me

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A typical underdog among the 6.6 billion homo sapiens who seeks to spend its remaining time to bring happiness to his loved ones. Constantly questioning how much and when is enough to attain a balance of success n happiness and to define one's purpose of existance instead conforming to unspoken society's pressures n norms.