Dear Fellow Engineers & University Graduates, Learn How To Become A Multi Millionaire In 25 Years. Must Read! (Understanding The Power Of Compounding)
Oct 8th, 2007 by AhYap
This post is dedicated to all working engineers and university graduates below 30. Aiya, so you are over 30? Nevermind lar, just pretend you are younger lor.
Most youngster think that MLM is the best opportunities to get rich. But when I look back at my friends who joined MLM for the pass few years, almost all of them quit and get back to their day job! When they try to recruit me in university time, they promised me a lot of get-rich-dreams and scold me stupid for not joining. Now they all quit. Imagine you have joined an MLM company because you believe in the sales pitch of your upline and later he quit! You are left alone! So think twice before you get into MLM.
I have 2 friends that are incredible Great Eastern insurance agent. One of them sold 97 covers last year. Another guy told me he can close 1 sale on every 5 meetings! Great! Unfortunately, I also have a lot of friends who can hardly sell 1 insurance policy in a month! Gave up, and got back to day job. Insurance is not for everyone.
How about trading? I have attended an Options Trading seminar 2 years ago. The speaker is the #1 options teacher in Asia based on the number of students he has. He is extremely high profile. I know he is very rich, but not all his students make it (including me).
You know what, when I talk to a few seminar participants in the graduates gathering few months later, most of them don’t even have a trading account yet! And the questions they ask me tell me that they simply learn nothing from the seminar. They are still not up to the kindergarden level!
Understanding the basic doesn’t guarantee you to make money, but NOT understanding the basic means you can’t even play the game! If I understand everything and actively trade for 2 years but still cannot make money, do you expect they can?
Again, it is not for everyone. You you haven’t heard me sing “My Money Live Over The Ocean“, you need to.
How about the current HOT make money online? Most people who teach you how to make money online make money by teaching you how to make money online. (sorry for this poor sentence structure.) They don’t know how to make money online. I have a long post on it.
How about starting your own business? Huh, if you can’t make money when somebody is helping you, i.e. MLM and Insurance, and you are having problem making money trading and internet marketing, then what is the success rate for you to start your very own business? Do you have the capital? Do you have the knowledge? Can you differentiate between a sole proprietorship and a Sdn Bhd?
MLM is out. Insurance is out. Trading is out. Internet marketing is out. Starting your own business is out. Then WHAT?
Just continue to work as an engineer! (or doctor or lawyer or anything that you study in University)
&@#^&$%^$#&%^&%^*$$%!
Ok ok, don’t get mad. Give me some time to explain. You just need to understand a simple concept. This concept is so SIMPLE that most engineers and university graduates CANNOT understand it because these professionals can only understand COMPLICATED things but not simple things. They know how to calculate e = mc2 but tell you 1 + 1 = 3. They can measure the speed of light and the number of electrons in a piece of silicon plus the amount of laser required to cut your eye without blinding you but they cannot understand this simple concept-
The Power Of Compounding!
Albert Einstein has repeatedly telling people the power of compounding in a lot of occasions. And now AhYap is doing the same and this is not the first post I talk about it.
“Compounding,” Albert Einstein said, “is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.”
Einstein calls compounding the “8th wonder of the world.”
Einstein, “The most powerful force in the universe is compound interest.”
Here is how compounding works. If you have $100,000 today and if you can grow it by 20% each year, here is what it will become in the 30 years period.
Begin _ $---100,000
Year 5_ $ _-248,832
Year 10 $ _-619,173
Year 15 $ 1,540,702
Year 20 $ 3,833,760
Year 25 $ 9,539,622
Year 30 $23,737,631
Did you notice that you just need 15 years to become a millionaire if you have $100,000 right now and you are able to compound it 20% per year?
Let’s don’t argue in this post whether 20% is achievable or reasonable, I will explain it in another post. At this time, you just need to know that Warren Buffett, the 2nd richest man in the world compound his money at 21% for over 40 years! In his first 10 years from 1957 to 1967, he actually compounded at 29%. Peter Lynch, the best mutual fund manager in the world compounded his fund at 29% for 19 years. He is retired now. Tan Teng Boo, the Malaysia #1 fund manager compounded at 24% for 10 years! And he is STILL ALIVE and NOT RETIRED YET! 
20% is definitely achievable if you know where to put your money.
There are 3 factors that is very important to compounding:-
1. The compound return rate (the interest rate)
2. The initial capital/money
3. The compounding period (how long you compound it)
We have talked about the compound return rate just now. From today onwards, I want you to remember the number 6!
AhYap, “If you can compound your money at 20% per year, your money will grow 6 times every 10 years.”
Remember it!
20% is what we are aiming for. If we failed, and say we only manage to compound at 15% (some Public Mutual Funds are able to compound at 15%), what will we get? For 15%, our money will grow 4 times every 10 years.
Notice the big differences? 20% = 6 times, 15% = 4 times. Don’t feel upset, even at 15% (4 times every 10 years), $100,000 will become $400,000 in 10 years and then $1.6 million in 20 years. Happy now?
What if you are good enough to get 25%? Your money will grow 9 times! Wow! 25% is still reasonable as Peter Lynch did 29% for 19 years. But don’t dream too big, everything beyond 30% for the long term is unreasonable and hard to achieve.
If you are ignorant and you put your money in Amanah Saham 2020 which gives you averaged 8% return, how much will it grow? Your money will only grow 2 times (double) in 10 years. Now you know why I sold all my Amanah Saham 2020 to my parents after holding it for 10 years since 1997!
Now here is the most interesting thing. At 20%, your money grow 6 times every 10 years. If you eat enough ginseng and bird’s nest, you will probably have a lot of 10 years in your life! If you are 25 and you live until 75, you have five 10 years. Eat more ginseng and maybe you have six, seven or eight 10 years more. 
Every 10 years, your money grow 6 times more!
$100,000 … (10 years later) … $600,000 … (10 years later) … $3,600,000 … (10 years later) … $21,600,000 … (10 years later) … $129,600,000 … (10 years later) … $777,600,000
If you have RM777,600,000 today, you will be ranked around the 20th richest men in Malaysia. But that’s too far fetched. 50 years is too long to imagine. Malaysia just celebrate his 50 year old birthday. So, we just target 20 years enough.
RM100,000 + 20 years + 20% compound = RM3.6 Million
Key understanding here is that the rewards from compounding come late in time. Early in time, the reward is not enough to feed chicken. Let me explain.
At the beginning, you will laugh at the return. On the first year, your money only increase RM20,000 from your RM$100,000. Most people make more than RM20,000 per year. So compare to their income, they can say, “So what?” It is not tasty at the beginning.
Even in the 2nd year, you only get RM24,000 from your nest eggs of RM120,000. Again “So what?”. Not tasty.
But when the snow ball grow bigger and bigger, your money actually increase to RM600,000 in 10 years. Your money will grow $120,000 on the 11th year! Well, there are still people who can make $120,000 per year. So nevermind, wait another 10 years until your snow ball grow to RM3.6 million. At the 21st year, your money will grow by $720,000! Now, tell me how many jobs can give you $720,000 per year? Even Hishammuddin doesn’t make it!
The power of compounding come late in time. It is like a exactly like a snow ball that roll bigger and bigger.
– NOW, THE PLAN –
1. Save RM100,000 in 5 years. You need to start as early as possible. If you start immediately after graduation, you should be able to save RM100,000 before 30.
Remember that the more money you are able to pump in at the beginning, the bigger rewards you are going to reap at the end. RM100,000 is the bare minimum. If you can, get more! RM100,000 gives you RM3.6 million in 20 years, RM200,000 will gives you RM7.2 million!
2. Aim for 20% compounded return. But you will still do fine with 15%. With initial capital of RM100,000, 15% will give you RM1.6 million in 20 years. 20% will give you RM3.6 million in 20 years.
At that time, petrol and toll fee at KL is dirt cheap for you and you will not be angry with Sammy Vellu.
Why The Early Stage Is The Most Critical!
A RM1,000 saved at 25 year old is worth a lot more than a RM1,000 saved at 35 year old. Because if you saved RM1,000 at 25, it will become RM6,000 when you are 35! (remember the magic number 6)
So it is the same for RM100,000! A RM100,000 saved at 30 year old is worth a lot more than RM100,000 saved at 40! Because the RM100,000 saved at 30 will grow 6 times to RM600,000 at 40!
This is why it is very important to start as early as possible and squeeze as much money as possible from your salary.
Here are my suggestions… these are not jokes!!!
1. Don’t buy a Toyota Vios or a Honda City yet! These are fresh graduates favorite cars. Don’t even buy a Proton Savvy or Proton Wira! Just buy a damn Proton Iswara (or Honda 70)! If you buy a Honda City, you probably will drive the Honda City for your whole life. But if you buy an Iswara and save the remaing for compounding, you can drive an S Class or BMW 7 series or even a Porsche 20 years later (buy 2nd hand one lar, cheaper). If you really want to buy a better car, buy it only after you have saved RM100,000.
[AhYap is still driving his damn Iswara]
2. Don’t buy a house yet! Rent a small cheap room for the first 5 years or stay with your mum! Buy a house only after you have saved your RM100,000 capital. If you get a housing loan too early, it is VERY hard for you to save the RM100,000 because of the heavy installments. A house is NOT an asset -> Read the book ‘Rich Dad Poor Dad’. It will only make your poorer.
3. Don’t buy medical card and insurance yet! My insurance friends are going to kill me on this. But I still have to say it. Buy it only after you have saved your RM100,000! If you really want to buy, a better plan is to kill yourself after 2 years so your family will have the RM100,000 insurance claim to compound and let them get rich.
Why can’t you just take the risk of not having an insurance policy for another 5 years? Most probably you don’t have any insurance policy when you are studying in University and in secondary school. Most people spend 10 to 20% of their income in insurance. That’s a lot of money!
4. Don’t get married yet! Uhhhh. This is not an advice, this is just the truth. When you have a family (even just a girlfriend), you will tend to overspend. Luxurious dinners, gifts and entertainments…
Furthermore, females are weaker with money (a.k.a. NUMBERS). It is very hard for them to understand why you need to save so much and the concept of compounding. I am not discriminating female, I am just telling the truth. Female hates physics and maths in secondary school because their brains are not design to process numbers. For girls, it is always better to buy a new shoe and a new Sony Ericsson right now, than to see it grow 36 times in 20 years so she can buy many many LV bags and Coach bags.
Girls are also brain washed by their parents since they are kids. If you want to marry her, you need to buy her a house and put her name on it. No house, no wife. You will also need to buy her an EXPENSIVE wedding ring. Because she says the SIZE of the ring represent how much you love her! Wedding dresses, wedding dinner, wedding album…. you have got to show that you love her, with MONEY.
[Girls, if you have a RM5,000 budget to buy a diamond ring today and you spend all to buy it, your diamond ring will immediately worth 50% less because it is now 2nd hand. And you will never have the chance to sell it at RM5,000 again in your whole life. If you buy a RM1,000 ring and put the RM4,000 to compound, you can buy a RM96,000 diamond ring 20 years later]
Cibai… why my post is getting longer and longer…
There are thousands of ways to save more money from your salary. Don’t go to Mid Valley, One U and The Curve will guarantee to save you plenty of money. You all know Sunway Pyramid has just expanded with a new wing, but don’t go!
Can a University Graduate Really Save RM100,000 in 5 years?
University graduates usually will have an income from RM2,000 to RM5,000 in the first 5 years of their working horizon. It is even more if you are a Malaysian working overseas in places such as Hong Kong and Singapore. If you can stay alive with just a mere RM600 PTPTN in University, it is BULLSHIT that you can’t save RM100,000 in 5 years with such salary.
The point is whether you are willing to save those money by temporary lowering your standard of living so you can reap the BIG reward in the future. And on whether you understand how much your RM100,000 will be worth 20 years later.
Save the damn RM100,000 in the first 5 years. Live like you are depending on PTPTN for the first 5 years. Then you can do whatever you want to do with your salary after you got your initial capital (car, house, insurance, wife, Sky Bar, Lorenzo, prostitute …).
To make my earlier examples more easy to understand, I’ve asked you to compound only after you have RM100,000. But in real case scenario, you begin to compound the day you start putting money into your capital! If you save RM10,000 for the first year and compound it at 20% for 5 years, it will become RM25,000! So the money you save in early years will enjoy compound gain. So even if you save less at the beginning when your salary is low, the power of compounding is already working for you. And in the late years when your salary is higher, you can save a higher portion of your salary. So RM100,000 is really not that hard!
Savings Plan Example -
Year 1 – RM10,000
Year 2 – RM15,000
Year 3 – RM15,000
Year 4 – RM20,000
Year 5 – RM25,000
Total _- RM85,000
So you saved a total of RM85,000 from your salary in 5 years. But since you already have money saved in the first 2 years (RM25,000), you should be able to invest those money and earn your remaining RM15,000 easily on Year 5. So you will be able to get a minimum of RM100,000. Understand now why car, house, insurance and wife will slow you down?
Final Words
I have explained the power of compounding to a lot of people in the pass few months. And honestly, most of them listen with one ear in and one ear out. Some even feel so sleepy that they open their mouth as BIG as the mouth of hippopotamus. So I decided to blog everything out once and save my saliva next time.
I even told many of them to buy ICAP when it is traded in the range of RM1.60. Luckily my parents listened to me, and also 2 of my friends (one of them is soufulow. Yo! high five). But most of the others never listen. This is the market price of ICAP compare to KLSE Composite Index.
It is traded in the range of RM1.60 for several months, giving people a lot of time to buy. I bought from February to April at prices range from RM1.44 to RM1.66, with the final averaged bought price of RM1.55. Soufulow even bought at the peak at RM1.67 in May. I sold all my mutual funds, Amanah Saham 2020 and close all my FDs to invest almost ALL my money in this one single stock. It closed at RM2.04 on last Friday. A 31% growth for me.
This close end fund (listed as ICAP in KLSE), is managed by Tan Teng Boo, the guy who did 24% compound for the last 10 years. You can learn more about the fund here. I will definitely write more about ICAP in the future.
I’ve shared my knowledge here. It takes me more than 7 hours to write this post. I’ve done my part. I don’t have the responsibility to make you rich. I could have watch movies or sleep in the last 7 hours (it’s 6.18am now). I don’t make a single cent from blogging. I have read 20+ books on investing in the last 12 months and this is the essence I have for you. Plus a few more that I have written in Intelligent Investing. So whether you want to make use of these knowledge, is totally up to you.
Subscribe to My Blog in a Feed Reader or simply
Subscribe by Email
eeee~ you are not romantic at all.
Romance has a price tag too
haha, don’t worry, I will allocate a romantic funds that compound so I can be more and more romantic in the future.
nice tips bro!!
ahyap how to crossblog with you ?
I listened to your advise and started a new blog
malaysian Voices. link me please
http://malaysianvoices.blogspot.com/
wow..it seems to be a very useful post man! But in order to save RM100,000 in 5 years, I will need to save RM20,000 each year.. Damn!! This is a real difficult task man! Arrgghh..1 million!!!
@ malaysianpeople: Good job. Added you to my blogroll.
@lowkei: How about
Year1 – 10k
Year2 – 15k
Year3 – 15k
Year4 – 20k
Year5 – 25k
Total – 85k
Since you already start investing/compounding on year 1, you can easily get the remaining 15k from stocks gain. After 5 years with the help of compounding, it should be more than RM100k.
Ur blog superb. Lot of information about investment. I enjoy coz the info u wrote in very interesting. Sometimes u make laugh with ur writing. I’m actually planning to invest in stock market. No idea at all about stock. I also thought like the uncle aunt to buy and sell. But I learn bit now what really mean investing in stock market. Now i want to invest 4 long term and hv free mind.
Thank you for your effort to write this blog. It’s really true “Better Than Reading Newspaper” Suggest me good stock to buy 4 long term.
@Sekar:
If i may suggest here, guessing what’s in Yap’s mind, he will tell you to buy ICAP at below RM2.17 – for all your capital. right?
Hi Ah Yap,
Very good topic! I read and will advise my younger siblings to do so, so when they graduated they will know what to do and what financial direction they are heading. I’ll start applying your advise, although I’m 4 years over the “A RM1,000 saved at 25″ still not too late.
By the way, I’m a female, yes math is not my favourite subject in school, but for financial stability, that i’m interested! If they teach student at school how to use math to make money in financial terms, it will help our next generation to handle their finances well. The math that we studies before, 90% of it is not useful in everyday life. I speak for those who are not engineers or accountants or architects, etc.
Keep it up, Ah Yap!
ah yap a….y no add me in msn le…i gave u my email last time mer
year1 – 10k..that is achievable! you wait for me..I will be there.
AhYap, can add me to your blogroll too? LOL… Thanks if u could..
By the way, about the “Why The Early Stage Is The Most Critical!” you said above, is very accurate and true actually. Why I said so?
1. “…If you buy a Honda City, you probably will drive the Honda City for your whole life…”
I have to admit that this is true, because some real life examples does happen in my real life circle. Uncle’s driving the same car for many years.
2. “…Don’t buy a house yet!…”
Although house is a property, but I won’t really buy it so soon or rent it. I prefer to stay with my family.
3. “..Don’t buy medical card and insurance yet!..”
I am NOT THAT (almost 75%) interest in such thing, so I won’t touch.
4. “..Don’t get married yet!..”
For sure la, thanks for list out all the points.
By the way, doing business online is one of the method I used and I had earn some before (future project not yet released). You know AhYap, during the FAMOUS time of monophonic ringtones, I earned some, and my seniors like Borzack (KL, Malaysia), Joni, Apin, Bernard (Indonesia) earned really quite a lot of it.
I think they earned until can buy car and house la… I started to compose monophonic ringtones since I was primary 6, joined iguanamobile since form1, at that time I compose one ringtone (used the notes from internet) need about 30 mins to 1 hour. And when I was form 3, level already reached lowest senior level, which used 5 minutes to remix or compose one ringtone. At that time, my time is money, because let’s say if one ringtone I sell to company A is RM5 (remix only, notes are provided by the company), or RM10 (compose myself with remix effect), and the times needed for me to remix 1 tone is about 5 mins, so 1 min = RM1 OR RM2 (if self compose).
Can you imagine how much we earned? Form 3 I got RM1000 within few weeks or few months (because too lazy to compose and remix), play-play only that time. But then, I dont cherish the money at that time la.. duno how to manage it, RM1000 spend within few days also. too bad, this market “die” liao…
But one thing for sure, that’s I will own some more businesses in the future because now everything is under my control and everything is under development status. I’m ordinary, lazy to study during primary and secondary school times. Some more I wasn’t come from a “good” family. You know? Hm, the word “good” represent a lot of thing. Example: Parents quarreling, fighting, the financial problem. And I think that, peoples who wasn’t come from a good family, will understand and learn more. That’s why I am who I am today. People who don’t know me might think that I am too selfish to spend much on eating for my own lunch, but I am not. Because I just want to see who will survive tomorrow.
Life…
TQVM
@Ahbi: haha, I don’t use messenger one. I have chat enough online for 7 years (1996 to 2002). After that I quit. Even my friends cannot find me online. Messenger become one of the items in my not-to-do lists. Reply to emails also become one of my not-to-do list. -soli-
@ Chan: Ok, added. But now close to all new requests, if not the list will get too long.
i also bought ICAP. but damn miserable .. bought at 1.74 and only 200 units coz super and exteremely poor. :’( Plan to sell at 2.15 and wait for it to drop and the buy alot alot in the future. Currently bought under my auntie’s account so have to sell asap or else next year all the minimum rate will increase to RM40.
But sibeh good ah the share!!!!
i’m very prospective about this- but how do you manage to get 20% compund interest?? even 12% would be difficult to find, wont it?
also remember there is also a negative force behind all positive forces; that is what we call INFLATION. inflation rate is currently around 2% for the whole country and 6% in big cities like KL. That means your money will diminish if you keep it in time.. meaning your 20% compound would only be like 18% after substracting the inflation rate
btw, how do i start a trading account? any minimum age for that?
You are a legend!
ahyap,
the new investment guru in the making
guys, you guys don’t need to check him on messenger coz i can’t even get him on email
I only knew how to save RM100k in 5 years even before I graduate. For those working in Singapore, that’s a lot easier. Just bring back around S$950 every month and you’ll be able to save Rm100k in 5 years. The rest of the money can be spent and enjoyed in the island republic. But I never thought further than that. After achieve RM100k, I don’t know what to do next. I don’t know how to ‘compound’. So, mostly I’d buy some insurance investment plans or invest in some businesses. So, I’d really like to know ‘how to compound’.
I totally agree that we mustn’t buy house and car in the beginning. That’s what I’ve been telling my friends and my sister. At the end of the day, my heart rules over my head. I bought a Vios. That’s the end of my super fast saving days. Many fresh grads and even my cousin asked about my Vios. They’ve just got the spending power for some time and that explains their interest.
I hope my cousin, sister and young friends will read your post.
Ah yap,
if compared with MLM, insurance agency or even FD or saving… Hope that you share more with us and keep it on.. Support!!
I am very impressed with your blog because is quite true and I totally agreed that investment on stock market is a best tools to make(roll) money but for long terms investor
Hi Yap,
I agree with the compounding theory too.. it really requires a lot of discipline to reject all kinds of temptations to make that type of saving. Meaning, if you are earning around 3k, while you are still young, no outings, no trips and no fun. Really tough. And so, I think balance is really important. A balance of lifestyle and having saving at the same time.
Just wondering, when you purchased ICAP, you are using the rule#1 method?
Very Interesting Post! However….
I do have extremely easy experiment for anyone to personally, experience and understand compounding tactually.
Now be warned before you take my challenge, because I am female and we have trouble with numbers, some think.
So, starting with $1, If each day you increase your savings by an additional $1, how much money will you have at the end of 30 days?
I will even give you an advantage of laying out the pattern.
1+2+3+4+5+……+30=?
Crazy easy, huh! This is compounding.
Now if you want to talk about the complexities of generalizing about people, whether it is their gender, race, or age, I won’t even mention men’s height…
I will leave you with this thought. Their mothers first teach all men.
AhYap,
I agreed with the plan, and in fact had already using it for the last two years. I am taking a second hand iswara, rented house, simple insurance plan, and tight financial planning (with writting down every spendings). And in-fact i’m already there 100k at age 27. However, one thing to point out is that putting everything in one ICAP is totally insane to me. I would rather divide all the money into several growth/stable stocks.
1. PBB (financial – can buy more when there is a financial crisis, people tends to sell financial stock hardly, good interest also)
2. IOICORP (looking at we can get 2700 L of oil from 1 tan of oil palm fruits, and palm oil got higher chances to become next power source)
3. MAHSING (did you ever see property that decrease in price over year?)
4. KOSSAN (Can only plant rubber tree here in south east asia, can buy when petro price increase -> increase transportation spending)
5. SHELL (good interest, petro price will get higher in future)
6. YTL (Good relationship with government)
7. DIGI (everyone is using it)
My picks is purely based on the facts that palm oil and rubber can only be obtains here in south east asia at low cost. Petro price will get higher and higher in next 10 years. BN will get more corrupt in next 10 years also due to increase in petro (so more projects to YTL also). Then why did I choose PBB bank then? –> because during bear market, this is the first stock that will get crunch, so more value investing. And of course mahsing, housing price also increase over year. However talking alone will make the money growths.
Hey ahyap
I know the power of compounding and the earlier you start the better. We all know that but the main point is that where to GET THAT 20% compounding investment? There’s none unless u invest in stock market.. and yes provided you know how to invest in it and I dont.
Eh, I’m a female and I loved Maths & Add Maths
Who says girls doesn’t like science & maths? Shopping uses maths too. And it’s not like girls are only spending. We care about saving – that’s why we go shopping during sales. It’s the same as guys who buy entertainment, car accessories, etc. It depends on the person, not gender!
But I like your conversational type of blogging. Hope to read more on how to invest!
hi yap,
I totally agree with you on the power of compounding. However, if I already have my first RM100,000, how to do I compound it at a rate of 20%? that’s like RM20,000 just for next year, more than half my salary per annum!
Yap,
Dude is a nice topic to share with and keep the good work, share more with us how the idea of getting 20% compounding per year. Im now on my plan to save to the money but yet have any idea how to compound it. In fact, i waste few thousand RM to invest in MLM and i gain nothing. And i ended up in where you shall know i am now. Cheers for the sharing!!!!
MLM, INSURANCE, TRADING, OWN BUSINESS, all is a good job. If you have interest on it and work hard you can make money. dear friend success is not measure from the amount of money in your bank accounts, car u r driving or tittle u carrying. its the amount of happiness u have inside you. So my best advice is search for happiness. From someone who drive BMW 5 series and hold manager post in japanese firm and doing financial as part time. Good luck
Haha loved your blog…what you have written are all very useful, true and funny at the same time! That makes people interested in reading your blogs…great job dude!
Yeah i also hope to read more about “Tips on how to get the 20% compound each year”…and i surely will share this great blog of yours with my friends and families…keep on the funny remarks!
*Cibai… why my post is getting longer and longer…*
Wahahahaha you’re the man ah yap! XD
Hey human that the most sensible thing to say,
Can you be happy without money ?
Hi Yap,
I am very interested for the topic discussed. Infact, my friend just explained me the same “compounding” theory to me yesternight. I am agree to lower the current living standard and to fight the RM 100K in 5~6 years. By the way, I am not so confidence that for the 20% investment return rate. Can provide some tips for the investment plans ar?? Can share your ideas to newbies like me ma?
ABOUT ICAP
http://boyboycute.wordpress.com
Board of directors of ICAP disposed shares.See here!
http://www.klse.com.my/website/bm/listed_companies/company_announcements/changes_in_s_holding/historical.jsp
So true, the power of compounding is staggering. I understand perfectly what are you trying to convey, and guess what, the savings part was almost essentially what I’ve planned to do even before I’ve graduated! However, it’s just that where can we invest to get 20% interest? I know about Public Mutual Funds and I intend to invest in it once I’ve save enough, but as you’ve written, it’s only around 15%. Anyway, your article is most enlightning and fun to read.
Hmm, thnx for writing this post, i truly appreciate it. You inspired me sumthin’ tht concerned to life. (Sry for being harsh) ( NO offences
)
I just don’t agree on nt gettin married.
Ngo Oiye Lei…Ahh Yapppp!!!
Vely good and blutal!! Some may end up becoming Gays (not because I dislike them)!!
This art or financial instrument is factual and enforceable with the “will” to commit to the general conditions and firm justification. YES, I shall try but with whatever amount deem fit to be filled into the compounding methodology. The formula had been surfaced and action must be taken.
I’d heard of such Islamic Banking (not in Malaysia) had this sort of instrument too when I was in Dubai. Furthermore, some brilliant Indians overseas dealing with money market does almost the same methodology.
Wahhh….em koi…Si Fu! For bringing the realisation to my life!
But please la…Si Fu, tell us more…!!!
Hi Yap,
I totally agree that we will have to start saving as soon as possible.
However, this thread will not be useful .. if you do not have any idea on how to reach 20% annual return for each year. In this world, there is no investment that guarantee you 20% return year in year out. Looking back at our KLSE and you could agree that the bull only start to build up from year 2006. It’s good to be optimistic but one have to be realistic in archieving his goal. While FD is giving out 3.7% annual interest, I could be happy if I managed to scrub 10% out of every of my return. 20% is definitely possible, but not realistic to achievable on the long run. Warren Buffet has done it at 21% over 40 years and are you trying to beat that odd ?
Anyway, it’s always a good idea to start saving as soon as possible and as much as you can.
Let’s pray for that 20% return but you shouldn’t be disappointed even with the small return because you have step out your first move while a lot are still searching in the darkness.
Well, said. You’re right about Toyota Vios & Honda City…most of the young graduates in my company drives that. I am however still driving a 14-yr old Proton Iswara. Many folks has told me to ‘upgrade’ cos i’m a manager and should drive a car that reflects this….lol…i always told them i hated buying anything that goes down in value immediately after purchase. I prefer to spend the money to invest in properties and good fundamentals stocks. Always buy something that appretiates in value. If you have to buy something that deprecitates, (sure, a car is a necessity in Malaysia) then pay the cheapest you can get.
Great Blog,
Learn a lot from you and about compounding too…… I too am a engineer but earning is sucks….
Will try to save and lower down my living cost starting from today onwards. And will look into ICAP as well… any other stocks u r recommending during this peak market?
“Cibai… why my post is getting longer and longer…”
Dude, that’s what you get when you talk about woman…
Hey!
I love this post alot. I’ve put a link from my blog to yours
http://www.siewkwan.com
Sifu Yap,
Thank you for your interesting blog. This is my first time on http://www.ahyap.com and I am already a die-hard fan. Hope my only daughter grows up to be as savvy and streetsmart as you (honest!), at least I dont have to worry abt her after I die..;P… Is there any other safer way to ‘grow’ my money other than in the KLSE (cos I have been burnt until no hair left)? i dont aim for 20% la…
Let’s say I have 100K now in FD and I am 38 years old, what do u suggest I do with it ? (Serious answer ah pleaseeee
)
Which is more in the long run ? 3% monthly or 3.7% yearly compounded interest ? Cos 100K gives you abt 300 a month , that means the next month you are earning int on 100300, but if
Thanks in advance .. and gambate
you put 100K for 1 year at 3.7, you will only get 103700 at the end of the year ( i suck at putting these in words but I am pretty sure you know what I mean
anzenchitai,
I am not Yap, but i would like to clarify few things.
1st are u sure FD giving u 3% monthly of interest or rather 3% annual but divided into each months at 0.25% each month?? because getting 3% every month, within a year u will have 12×3% which is 36%. That is a lot more than gaining 20% in stock market a year. WoW, i seriously don’t think bank will go for that!!
If u choose to which return is higher definitely 3.7% annual is higher compare to 3% per annual/ 12months (calculation is shown below).
3% per annual/ 12months, u will get RM103041.60 after one year, while 3.7% as u mention u will get RM103700 after one year/
Month FD % Interest Amount
1 100000.00 3.00 3000.00 103000.00
2 103000.00 3.00 3090.00 106090.00
3 106090.00 3.00 3182.70 109272.70
4 109272.70 3.00 3278.18 112550.88
5 112550.88 3.00 3376.53 115927.41
6 115927.41 3.00 3477.82 119405.23
7 119405.23 3.00 3582.16 122987.39
8 122987.39 3.00 3689.62 126677.01
9 126677.01 3.00 3800.31 130477.32
10 130477.32 3.00 3914.32 134391.64
11 134391.64 3.00 4031.75 138423.39
12 138423.39 3.00 4152.70 142576.09
Month FD % Interest Amount
1 100000.00 0.25 250.00 100250.00
2 100250.00 0.25 250.63 100500.63
3 100500.63 0.25 251.25 100751.88
4 100751.88 0.25 251.88 101003.76
5 101003.76 0.25 252.51 101256.27
6 101256.27 0.25 253.14 101509.41
7 101509.41 0.25 253.77 101763.18
8 101763.18 0.25 254.41 102017.59
9 102017.59 0.25 255.04 102272.63
10 102272.63 0.25 255.68 102528.31
11 102528.31 0.25 256.32 102784.63
12 102784.63 0.25 256.96 103041.60
2nd, honestly i do not have any idea what u need to invest. I myself has burn some in the stock as well, but i believe is a process of learning. When u play with fire and burn a bit, u will stay alert to the fire and try control it so it won’t burn u again right? But maybe u can try to invest in other field than stock market, such as property, business, etc etc. It really depend on individual which suit them best.
If I have RM100,000 and I do not need to spend those money for the next 5 – 10 years. And I am “forced” to invest everything today (based on today closing price), I will buy -
RM10,000 Parkson @ RM7.00
RM10,000 PIE @ RM5.00
RM10,000 Padini @ RM3.40
RM10,000 VADS @ RM5.60
RM10,000 HAIO @ RM2.96
RM10,000 SWEEJOO @ RM1.29
RM10,000 TONGHER @ RM2.84
RM10,000 TM @ RM11.10
RM20,000 ICAP @ RM2.22
I am not good at researching and evaluating companies, these companies are picks from Tan Teng Boo and are in his paper portfolio (in his paid newsletter at icapital.biz) and also real holdings on the close end fund iCapital.biz Berhad. What I did is to simple to pick the companies that I like and understand and invest equally on them.
@eric: Your calculation is correct. If we got 3% compounded monthly, RM100,000 will become RM3.471 million in 10 years!
Banks will go bankrupt after that.
Eric, Thanks for the info…heehee…my error…mana ada 3% monthly..per annum adalarrrrr… 3% monthly Ah Yap also sell all his stocks and put into THIS WATERFISH BANK lor,,,hahahha thanks for pointing it out though ! ;P Actually property is a good idea , thought of investing in shophouses but good location also near to 1 million..mana ada duit ????? too risky leh
Ah Yap, ICAP sooo high u want me to buy meh??? After that, u will call me SOHAI ! hahaha…but seriously I am really interested in ICAP but the price a bit steep now .. just curious , when do you actually take profit for ICAP? I mean the market is so volatile , though ICAP consist of good stocks , but if market crash surely ICAP will be affected too mah , so apa macam? And I thank u for all your tips, I will surely monitor those closely… if i make money, i will buy u kopi, Starbucks kopi..ok?
If you plan to put your savings in KLSE,you must be prepared to get your ass burned.Investing in KLSE is a bumpy ride,but if you do it correctly,you will reach your destination.
Hey Everyone,
Market after Election is crashing!! Anzenchitai, this might be the right opportunity for u to invest if u still planning and believing in KLSE stock market hehehe…
What is everyone opinion on this market now? should be start pulling out stock or should be start putting in and building up the stock? the market might go lower down or goes up, no one will know, Well how bout everyone gives their opinions and share them. We can learn from each other.
I personally think bcz election just ended, and some government policy might chance, there is a chance that it will continue to downturn until the new government is established with their policy and direction confirmed. But i do find some shares to be very interesting price at this time, such as KPS at 2.40 and Resort at 3.44
at this moment (11.06am 10 March 2008). Although i eyed this two companies, but too bad i burn my ass and leave with little to no $$ to own these stocks.
Guys tell me what u think ok?
What a wonderful article! Man, you rock.
yeahlor, so syiok leh mkt ….i am actually eyeing Sime Darby … but i think tomorrow will still LAU SAI …wait and see lor …
Haha, The market goes up already!!
SIME Darby is a good company, but I am worry of it’s liquidity. With price so high, will it have problem to looks for buyer when we want to sell it?? I am still consider myself a newbie in stock market, so if there is anything which i said is wrong, please correct me.
Hmm…. With Sime Darby price, will it be better to go for company thay monopoly the utilities like TNB? TNB is currently very low in price and seem like they are taking the loss as the fuel price has hike. But i still believe they will survive when the fuel price is revised. And i also believe since they monopoly the electricity in malaysia, there hardly any competitors so their business should be well guaranteed!
yeahlor, mkt went up already but still unstable i must say , Sime Darby , I played this counter b4 and there is no problem finding buyers, believe me ! But this counter isnt as active as b4 , so for long term it is OK .. yeah , I was looking at TNB too since the price is near year low (but it is only March ..hehehe) but my remisier advised against it . He said to look at cheaper counters like Ramunia /Kencana / Sapcres so u can buy more and its all subsidiaries for Petronas … so quite safe … anyway, that is what he says so if anything happens , dont look for me ah..lol…anyway good luck to u Eric … i am still cautious , dare not dive in cos like i said b4, I have been burnt and not much hair left
totally agree with u AhYap. many professionals thought that by working hard through their whole life in the office will make them rich. but i wont be surprised that professionals such as lawyers, engineers are making less money than a non professional.
that’s why we need to work smart, not hard!!
cheers for all smart engineers!
hey ahyap,
i really admire ur blog. this is not the typical boasting moaning blogs tat u will normally find out there. urs educates the public. i am just 17 years old and have been deeply interested in ur blog lately. among the 20 books or so tat u hav read does it consists of ” Secrets of Millionaire Investors” by Adam Khoo & Conrad Alvin Lim?? bcos i jz bought this book. trying to start very early here as i LOVE MONEY!!! haha..
anyways.. pls update ur blog.. looking forward to it..
keep up the good job.. i do not see the reason to declare myself as a fan .. as u hav tons i suppose…
anyways.. keep up the good job!!
I am a practitioner of the compounded method of investing. Been in the market since june 1997. Learned a difficult lesson, cause the market crashed a few months later and kept going down for one whole year. KLCI went from 1100 points to a shocking 300+. All along the downward slide people kept throwing in money, whether hard earned or borrowed ( maybe stolen also HA! HA!) believing a turnaround was going to happen anytime soon but alas so many drowned.
Many lives were thrown upside down. Many people left their families to go overseas to send home money for food, clothing, shelter, pay off debts etc.
Like a TSUNAMI it can come and wipe you LICIN. I am living in Canada now with my family but still have a lot of interest in KLSE.
Because our stocks are still cheap compared to many other markets.
I can write a very lengthy article but I dont want to write too much.
Let me tell you fellow malaysian’s ( I sayang a lot!!), be careful with your hard earned money. Invest in a stock or stocks that are very very strong, with good growth over a long period of time ( Good history of performing well ). Secondly dont throw in everything!!.
Imagine bad times come, if you lose your job or business and need money and all your money is in the stock market and it is down badly. What will you do?? Sell at a loss ?!
My advice is keep some reserves to at least last 6 months to a year of no income coming in, while you make adjustments.
Invest in a stock that can make you money even in bad times. My favorite is YTL POWER cause it has long term contracts for utilities ( water and power ), pays good dividends – cash and shares.
It also has $7 Billion Ringgit in reserves!!!, and is actively looking to expand businesses locally and abroad.
If bad times come, Tan Sri Francis Yeoh will be out with his shopping bag. He happens to be my idol lah.
There are some good counters but not very many, so choose wisely. I have no stomach for Yo! Yo! movements.
Good luck.
Ah Singh
I do agree with Ah Singh.Investors should know their risk tolerance.Some people may have a lot of liquidity but are afraid to take risk.So,they just keep all in F.D. Meanwhile,some people have very little cash but they gamble everything in KLSE,putting their life and families at the edge.
Investors should allocate their investment (safe & risky) according to their age and risk appetide.They should plan their finances before jumping into any investment.
Remember,there are always uncertainties in life.You will never know what will happen tomorrow.God will laugh at you if you think you know because He knows you don’t know.
Damn..i sound like sohai.
Hi Ahyap.
This is an interesting + HELPFUL blog to read. (i hate reading btw, but manage to read finish). I have been planning/trying to save 100k in next 1-2 years. This month is d first month for me working out my so-called-plan and it work as planned. earning near 10k a month. (3k for rental, loan, internet, food etc, n house loan – for parents. they r old. they cant wait n i only hav one chance) Total of 7k a month.
Im targeting to get rm100k as soon as possible. but after that WHAT? I have no plan or anything else yet. My way of earning 10k a month may not work for too long so i gotta keep planning ahead so i will not phase out! (NO.im not selling pirated dvd…)
Can you write an article about.. what will you be doing using rm 100k to invest on a better business or others? btw im 23 this year and lots to learn.
Thanks!
Wah clivengu, what business are u in or what field u working for? just 23 and earning 10k per month, that is kind of good result. Well i have no idea what you should invest with your future 100k, but if the business is helping u to get 10k per month, why don’t u expand it (if i mistaken it please correct, not sure what kind of job will give 23 yrs old 10k per month). Well i think if you r good in something, it is better to follow that path and continue to do it. sometimes it is not necessary to invest in stock or real estate to get rich.
*p/s please tell me what u did to earn that 10k… really interested me!
lol…i more pro..at age 24..i am earning 11k per month.. u interested to know?
Omg! If I can start earning 3-4K at 24 I be damn happy wei! What u all doing la? Ah long meh?
Well intelligent investor, if you are willing to share about ur experience and how to achieve ur 11k per month, i believe there is a lot ppl out there willing to listen.
I sometimes really wonder how u guys manage to earn so much at such a young age, but everything is possible right? Only maybe not everyone is possible to achieve it. Since there is a winner, so there must be a loser somewhere. But i am still interested what u work in to achieve it so can you tell me and maybe everyone in this blog wanna hear it too
you are 100 % right !!! and dont forget get rid of bank loan too !!
AhYap,
I believe that you are Engineer too..Am i correct?
Hello AhYap, you almost correct. But not all human can do that. May be only less than 0.5% can succeed. I’m 48 now. @ 20 year old I start planning my financial. Now I owned 3 properties in Malaysia fully paid. One property in Singapore. One Malaysia Car fully paid. One Singapore Car. And CPF in Singapore more than RM1.5 million. 3 property Rented. Invested in Tabung Haji. Internet Biz on going. I’m still working earned RM 12,000/month. My adviced is own a PDA, and start using microsoft excel calculating all the way. Just create as much passive incomes. But that not sound that easy….a lots of planning…..determination…scracrified….dissipline…It can be done! I already DONE IT. I’m going to retired soon…. Good Luck !!! and start “THINKING VERY HARD EVERYDAYS, DAYS AND NIGHTS”
I guessed you won’t dare to talk about 20% on share market now, especially these 2 years. All the earnings for the past 3 years have gone to the drain and they only look good on paper.
Well, I have this amount, but guessed it’s only worth 60% now.
@GT, this is the time where a 20% compounded return is guaranteed for the next 10 years and is exactly the time to invest. I am fully invested in the stock market.
Congratz to Zain who are able to retired with lots of passive income. Well done, i believe all the sacrifice worth it.
Yeah man~ that’s the way. But i guess most prefer to buy at good time when everyone’s happy and all stocks are expensive (and sell low when everyone’s panic and depressed).
AhYap,
Thanks for the reply. However, I have the concept of buy low sell high. Just wondering if the market will crash further in Year2009? It’s hard to predict, it’s 90% saying it will.
Are you into Mutual funds or individual stocks market?
Ah Yap, you really did a good job writing this post…sacrificing your time & effort to educate the average pops…kudos for you!!!
Thanks for the information, btw i very lazy to open book read intro, bla bla bla.. ur post make it simple.. Thanks Again =D
[...] Nothing’s wrong with working hard for money. But smart people will do vice versa and have money work hard for them. Investing is a life-long lesson for everyone – the earlier you start the better. You already started by reading this post and perhaps the next stop should be Uncle Yap’s article about the miracle of compounding. [...]
I think it is achieveable to save RM50,000 in 5 years for average graduates. In other words, save RM10,000 every year. Invest your money (RM2000 for every transaction) in ICAP every two months when it is still undervalued. Never buy ICAP when the price is too high or it is overvalued.