kcchongnz blog
The Eighth Wonder of the World kcchongnz
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Albert Einstein
Most people have heard about the seven wonders of the world; Great Wall of China, Great Pyramid of Giza, Roman Colosseum, Taj Mahal etc. However, none of them come close to approaching the true eighth wonder of the world. Here are some reasons why.
In the early 1600s, the American Indians sold an island, now called Manhattan in New York, for various beads and trinkets worth about $16. Since Manhattan real estate is now some of the most expensive in the world, it would seem at first glance that the American Indians made a terrible deal. Had the American Indians, however, sold their beads and trinkets, invested their $16 and received 8% compounded annual interest, not only would they have enough money to buy back all of Manhattan, they would still have several hundred million dollars left over. That is the power of compound interest over time.
And what about the legend of the inventor of chess? Apparently he was granted any wish by a grateful king, and asked to be rewarded with one grain of rice on the first square of the chessboard. The amount was then to be doubled on each successive square. The king agreed, thinking he would have to pay a few handfuls of rice. He was shocked to discover that by the 64th square — thanks to compounding — he would owe the inventor enough rice to carpet the entire planet!
Einstein called it the ‘eighth wonder of the world’. He was talking about compound interest, which supercharges our savings and investments. This applies to compounding return from investment by reinvesting the dividends we have into the stock market over a long period of time. In the long run, we’re talking serious dosh by reinvesting the interest/dividend we earn to earn more interest/dividend!
The longer we leave our money, the more powerful the compounding interest effect. So, the earlier we start saving and investing, the more we make from compound interest/dividend or profits from stocks.
The Amazing Rule of 72
Here is an easy rule we can use to work out how our savings or investments can grow with compounding return.
Just divide the number 72 by the compound rate. The result shows how long it will take for our money to double without further savings.
For example, take $100,000 that is earning 4% interest (after tax). 72/4 = 18 years
If interest rate is 6%, number of years to double is 72/6 = 12 years, etc.
Table 1 below shows the number of years to double an amount at various interest rate,
Table1: Number of years to double your money with various rates of return
|
Interest rate, % |
2 |
4 |
6 |
8 |
12 |
18 |
24 |
|
Number of years |
18 |
18 |
12 |
9 |
6 |
4 |
3 |
The Magical Power of Compounding
If rate of return is 4%, the initial amount of $100k will multiply to $200k in 18 years, and becomes $400k in 36 years, and $800k in 54 years as shown in Table 2 below.
Table 2: Ending amount in thousands with initial $100k
|
% return/Years |
18 |
36 |
54 |
|
4 |
200 |
400 |
800 |
|
8 |
400 |
1600 |
6400 |
|
12 |
800 |
6400 |
51200 |
If rate of return increases to 12%, the initial $100k becomes $200k in just 6 years. $400k in 12 years, $800k in 18 years, etc. By the time it reaches 54 years, the total amount becomes $51.2 million, 64 times more than the $800k with a compounded return of 4%. That is the power of compounding, the massive growth in investment from a higher rate return on investment.
But debt can compound us too!
Compound interest also applies to debt – although not in a good way. Costs can compound too. The slower we repay a debt which charges interest, the more we end up paying back over time. Think about the compound interest for credit card debts with 19% interest, say for 10 years.
If you borrow $10000 from the loan shark at an interest rate of 6% a month, in 12 months, or one year, the amount you owe him is $20000. If you can only pay him in 2 years, you got to pay $40000. Don’t ever play play with “Along”, legal as well as illegal “Alongs”.
Saving for retirement
For a 24 years old young graduate just entering the job market, you have one very valuable thing out there when it comes to planning for eventual financial freedom, TIME. For him, “Start saving now” are the three most powerful words in personal finance.
If you start saving RM5000 a year starting at age 24 now, or less than 15% of the salary of a young graduate and increase your saving every year by 4% when your salary increases, and earning 10% compound annual returns, you would have accumulated RM2.2 million by the time you retire at 60. Figure 1 below shows how your saving grows from year to year in an exponential way.
But wait until age 45 to start saving for that RM2.2m and you'd need to sock away RM60,000 a year, or twelve times more.
With the growing Employee Provident Fund, plus your saving and investment in a safe manner, your total retirement sum can to a handsome RM4-5 million when you retire at age 60. At that time, due to inflation, the money you will have won’t be able to buy the same things you can buy today, but that RM4-5 million is still worth a sizable RM1.4 to RM1.8 million in today’s money, good enough for retirement for a reasonable lifestyle if by then you are debt free and commitment free.
Compound your saving at 10% a year is not from putting your money in the bank earning a meagre 3% interest, but by investing prudently in good businesses when they are selling cheap.
Also be mindful that earning a compounded annual rate of 10% will be unlikely to come from following tips, rumours and hypes in the stock market, or simply “tikam” any stock in the market. For if you do so which likely will result in losing big in the market, your dream of compounding your investment will be derailed for a long time, or even will never happen.
There ain’t tooth fairy and free lunch in the stock market. If there is, everybody who dabbles in the stock market would be rich, and there wouldn’t be this phenomenon of 90% of individual stock investor is losing money in the stock market as shown in many studies.
For those who are interested in your personal finance and the options and ways to invest for higher return than bank deposit in a safe manner, please contact me for a free eBook as a guide.
KC Chong
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Discussions
3 people like this. Showing 50 of 103 comments
kcchongnz > May 8, 2019 8:34 PM | Report Abuse
where is the evidence?
=======
evidence? what evidence.....I not interested in your evidence.
2019-05-08 20:36
Posted by qqq3 > May 8, 2019 8:36 PM | Report Abuse
where is the evidence?
Here are some more evidences of what shares quack quack quack had quacked about the last 2 years (Besides Jaks and Sendai) and their prices now. How on earth you triple your meager RM100K? Or that amount is halved now?
Stock price then 5/9/2019 Gain/loss Gain/loss %
Bornoil 0.10 0.045 -0.055 -55%
CBIP 2.25 1.08 -1.17 -52%
Ecoworld 1.29 0.89 -0.4 -31%
Taan 4.79 2.32 -2.47 -52%
Jtiasa 1.35 0.565 -0.785 -58%
Average -50%
2019-05-08 20:50
You mean fake accountant sailang in single stock?
Really brave.
No wonder he can claim he made 200% from 100k to 300k in 2 years.
But if you think in different perspective, Jaks from 140 fell to 40 sen, and Sendai from 140 fell to 47 sen, 70% from his so-claimed 300k will be again at best left only 100k.
If in between, he used OPM, his 100k may only become less than 10k.
Pity fake accountant has to survive on his meagre 10k for next 20 years to come..............
2019-05-08 20:50
kc........really meh....It show my trading really works...If I don't trade, I surely die already.........
2019-05-08 20:51
ks55 > May 8, 2019 8:50 PM | Report Abuse
You mean fake accountant sailang in single stock?
========
two problems with you statements
1 I am a genuine accountant
2 last 2 years years have been very good years for me......
2019-05-08 20:53
Better follow CP Teh.
Sell your house.
Sell your Cub.
Sell your son's bicycle.
Punt all you have when Sendai reaches 40 sen.
You may get back 20k when Sendai moves back to 80 sen in 10 years........
2019-05-08 20:54
Posted by qqq3 > May 8, 2019 8:51 PM | Report Abuse
kc........really meh....It show my trading really works...If I don't trade, I surely die already.......
This is really classic. Let me save it here.
So how do we believe that with all the terrible picks that you made, and you have sold them for 300% gain, just like what you said about making 300% profit for Jaks and Sendai, when their share prices have dropped by average of 70% since you quacked abut them?
Just take your words for it?
2019-05-08 20:55
kcchongnz > May 8, 2019 8:55 PM | Report Abuse
Just take your words for it?
======
up to u lah...I have no right to insist........
2019-05-08 20:57
ks55 > May 8, 2019 8:54 PM | Report Abuse
Better follow CP Teh.
Sell your house.
Sell your Cub.
Sell your son's bicycle.
Punt all you have when Sendai reaches 40 sen.
You may get back 20k when Sendai moves back to 80 sen in 10 years........
=========
fyi, if sendai go to zero, I am still positive for the year 2019......
2019-05-08 20:58
ks....FYI , far as I can recall offhand, my two biggest winners this year are dayang and Jaks....the former by following KYY , the latter by going against KYY....go figure.........
2019-05-08 21:03
It is immaterial whether you remain in positive.
Your main problem is you are having too little to see you through your golden age.
Even if you claim to have 300k, and that 300k still intact, you can never last for 5 years.
Do you have a loan-free house?
Sell it.
Put in Reits.
At least you still can get 60k a year for your living expenses, provided your house worth more than a million now..........
2019-05-08 21:06
ks....and as far as Dayang is concerned, I started promoting Dayang to KYY when Dayang was 60, 70, 80 when he was promoting Carimin.....nice move, every thing worked out well for me.....can't do without KYY.
2019-05-08 21:09
It is immaterial whether you remain in positive.
Your main problem is you are having too little to see you through your golden age.
2019-05-08 21:12
ks55 > May 8, 2019 9:06 PM | Report Abuse
It is immaterial whether you remain in positive.
Your main problem is you are having too little to see you through your golden age.
========
happy and positive....miracles happen to those happy and positive......I learn that while observing KYY.
2019-05-08 21:12
Posted by ks55 > May 7, 2019 11:12 PM | Report Abuse X
If you are 24 yo today, how much is your expected salary when you are at 60, i.e. 36 years from now?
For dumb-dumb, you will expect yearly increment of 4%.
For average or slightly above average, yearly increment 8%.
For high achiever, yearly increment 12% to 15%.
Say if you are with average performance, effective increment 8% yearly taking into consideration 4 promotions/job switch through out your working life, you are expecting 16x your current pay.
If you are earning 3k now, 36 years later (if you retire at 60), you should be earning 48k a month.
Based on last drawn pay at 48k, you need 5.76m equivalent to 120 months of last drawn pay.
If you are spending 60% of your income, when you retire at 60, last annual income is 576k. 60% means 345.6k a year.
If you can generate 10% to give 576k a year, you will be very much prepared for inflation up to 4% a year.
Planning for retirement is not calculate based on what you need today, but to be contemporaneous to the time of retirement.
2019-05-08 21:13
Icon8888 > May 8, 2019 9:11 PM | Report Abuse
Fuiyoh morning quarrel until night....
========
what else to do since they want to entertain me?
2019-05-08 21:13
ks55 moron I made tonnes of money from bimb warrants
Because I was happy and positive
2019-05-08 21:14
y ks55 > May 8, 2019 9:13 PM | Report Abuse
Planning for retirement is not calculate based on what you need today, but to be contemporaneous to the time of retirement.
======
u sell insurance and unit trusts? its their rice bowl....
2019-05-08 21:14
You never had a plan when young.
Failing to have a credible retirement planning is now make you fail to have risk-free retirement life.
Pray you will learn more from KYY by PLP more, if he still care about your existence.........
2019-05-08 21:16
Posted by Icon8888 > May 8, 2019 9:11 PM | Report Abuse
Fuiyoh morning quarrel until night....
It is actually a social service exposing the scams of the biggest conman in i3investor.
It is also fun to expose the biggest scam artist I have ever encountered.
2019-05-08 21:17
Posted by Icon8888 > May 8, 2019 9:14 PM | Report Abuse
ks55 moron I made tonnes of money from bimb warrants
Because I was happy and positive
==================================================================
Moron?
When did I comment on bimb warrants?
Show me the proof!
Or else, you are just a big liar!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2019-05-08 21:20
kcchongnz > May 8, 2019 9:17 PM | Report Abuse
Posted by Icon8888 > May 8, 2019 9:11 PM | Report Abuse
Fuiyoh morning quarrel until night....
It is actually a social service exposing the scams of the biggest conman in i3investor.
=======
wrong again, I don't scam anyone.....and I don't take gifts even.....
2019-05-08 21:21
but I also doing social service by exposing kc the king wears no clothes with his compounding...........
2019-05-08 21:22
osted by ks55 > May 8, 2019 9:16 PM | Report Abuse
Pray you will learn more from KYY by PLP more, if he still care about your existence...
===========
I don't call it PLP....I call be beneficial for me......
2019-05-08 21:25
oops wrong person
It is ks55_
ks55_ Trap in Jaks and BIMB-W?
04/01/2019 3:21 AM
2019-05-08 21:26
By virtue of his user ID, "I con", meaning that he has very malicious intention to con people from the first day he came to i3........
2019-05-08 21:27
Posted by qqq3 > May 8, 2019 9:09 PM | Report Abuse
ks....and as far as Dayang is concerned, I started promoting Dayang to KYY when Dayang was 60, 70, 80 when he was promoting Carimin.....nice move, every thing worked out well for me.....can't do without KYY.
Save this another classic.
Really ah? I got to check back what you have said but off hand I knew that was a big lie too as usual.
KYY was having a big promotion of Dayang in i3investor forum. I watched the ""fantastic"" video and saw OTB helping him with the presentation. How come you were not there to help?
Or was you the one who entice him to buy from RM1.30+ all the way to RM1.80, and you off load and made another killing, just like Jaks and Sendai?
2019-05-08 21:35
kc............U are right...I sold at $ 1.70......
but I told KYY not once but 3 times to swap his Carimin to Dayang when Dayang was 60, 70, 80......
2019-05-08 23:35
at $ 1.50.....I told KYY , selling Dayang at between $ 1.60 to $ 1.80 is called smart. I made that comment not once but several times.........He wrote back to say he cannot be so dishonest as to sell at $ 1.70 when he has just been writing about it....To me, it is money or honor, KYY chose honor.
2019-05-08 23:38
19 years old > May 8, 2019 11:49 PM | Report Abuse
how many years already both of you have been quarreling ? boh sien one ?
--------
19 years more or less.
2019-05-09 00:00
kc......for the masses, this is enough..........Posted by qqq3 > May 8, 2019 8:46 PM | Report Abuse X
as long as u focus on quality and low turnovers , not over/under valuations , u have a decent shot at success.
but since I am a pro, I do all sorts of stuffs one.
2019-05-09 00:05
Posted by 19 years old > May 9, 2019 12:02 AM | Report Abuse
you see, want to tell lies also don't know how to tell..
=========
really meh? I did say more or less......
2019-05-09 00:06
Dear all,
I think ks55 mind to say: Pray you will “earn” more from KYY by PLP more, if he still care about your existence........
Pity quack accountant, Mr. Koon did not care about his existence anymore and did not whatsapp him to buy Carimin and Dayang. Quack accountant still so thick skin trying hard to PLP Mr. Koon to buy Perdana to no avail LOL.
Posted by qqq3 > Mar 14, 2019 08:16 PM | Report Abuse
sslee
I tried to interest kyy in Perdana he seems very happy to stay in Dayang.....
Thank you
P/S: Mr. Koon highly recommendation OTB. Quack accountant must be green with envy but what to do, who going to trust a snake-oil salesmen trader?
https://klse.i3investor.com/blogs/koonyewyinblog/194790.jsp
My Recommendation for Mr Ooi Teik Bee - Koon Yew Yin
https://klse.i3investor.com/blogs/koonyewyinblog/195174.jsp
Publish date: Tue, 26 Feb 2019, 12:49 PM
Dayang is a good example. When I saw its profit growth for its 2 consecutive quarters 2nd and 3rd quarter which complied with my golden rule, I started to buy it.
So Mr. Koon start to buy on end Nov when Dayang is 50cents+
So now Quack accountant want to take credit “ but I told KYY not once but 3 times to swap his Carimin to Dayang when Dayang was 60, 70, 80.....” LOL quack accountant is
Bold –Faced Liar
Narcissistic Liar
Pathological Liar
Compulsive Liar
Sociopath Liar
2019-05-09 00:11
y Sslee > May 9, 2019 12:11 AM | Report Abuse
Posted by qqq3 > Mar 14, 2019 08:16 PM | Report Abuse
sslee
I tried to interest kyy in Perdana he seems very happy to stay in Dayang.....
========
that's true....KYY never came back to me about Perdana......still promoting Dayang to me.......but he knows I sold Dayang long time ago........
2019-05-09 00:18
Posted by Heavenly PUNTER Research IB > May 8, 2019 8:28 PM | Report Abuse
I know compounding, if I do it properly, I will have at least 20 million by 60 years old. That is for sure.
==========
good to have $ 20 million but don't need 20 million one.....
I very flexible one......people are very flexible one when circumstances demand........
2019-05-09 00:42
Haha,
Quack accountant why not tell the truth to Mr. Koon that you are against OTB because OTB refuse to recommend JAKS and SENDAI to his subscribers. You are against KC because KC keep talking bad on JAKS, SENDAI and occasionally criticize Koon’s share selection. You are trolling KC to get even with KC for him.
https://klse.i3investor.com/blogs/koonyewyinblog/112415.jsp
https://klse.i3investor.com/blogs/koonyewyinblog/110867.jsp
Please remember to sob between words that I do all these for you and only you. Hopefully Mr. Koon will be so touch by you, have a change of heart and give you tip again.
My advice to you please spend some money to learn FA (How to read Balance Sheet) from KC and TA from OTB otherwise your little tiny sausage will not last you long.
Thank you
P/S: I am against you because I am trying to call you out as you are:
Bold –Faced Liar
Narcissistic Liar
Pathological Liar
Compulsive Liar
Sociopath Liar and gibberish/treacherous/danger to i3community.
2019-05-09 08:42
lee.....A pro does not need advise from a novice....just to let u know.
about my postings...I post as I see fit......
2019-05-09 09:04
USP....unique selling proposition.
I noticed I have USP , unique perspectives of stuffs I write about. Not just the mundane, not just the run of the mill old stuffs.
I believe I add value through what I write....In that sense, iit also is social service...giving back to society....
See.....SSLee....I very noble one.
2019-05-09 10:19
Mr compounder himself, the Bufalo says trade war no winners, only losers.
Trump wants it his way. So, trade wars and tarifs will come this Friday. No deal. At best, announcement of additional tarifs as being of temporary nature subject to further negotiations.
meaning what? meaning if u want to hold shares, u better be holding quality stuffs. ....not because the stuffs look cheap to you.
2019-05-09 13:11
Let it crash beneath 1600. Then we will see how many actually hold stocks for the long term. It may slip below 1600 but I suppose a mini-rebound will occur.
2019-05-10 00:04
on a selfish point of view, i am ready (have prepared) for a black swan event.
2019-05-12 14:12
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Posted by qqq3 > May 8, 2019 8:23 PM | Report Abuse
kc............really meh ?
But I am a trader....I can say one thing in the morning and do the opposite in the afternoon....then how?
Anybody can say anything here, but where is the evidence? Just take your words, that you bought this last month and now you sold at and made xxx? Any evidence that you bought at that price and sold at this price and made xxx?
But I do have some evidence of what yoy said you bought and the results as it is now as below,
10/31/2018 5/9/2019
KESM 12 7.66 -36.2%
Layhong 0.4 0.465 16.3%
Seacara 0.28 0.19 -32.1%
D&O 0.89 0.67 -24.7%
Elsoft 1.29 0.925 -28.4%
Hibiscus 1.12 1.06 -5.4%
The above are hard evidence, documented in i3investor.
What you claimed has no record, but from what you said.
Which is more reliable?
If what you quack quack quack was true, I think your miserable RM100k has not much left now with the tanking of your Jaks and Sendai.
2019-05-08 20:34