29 November 2013
KLSE.8K (a.k.a. 8K) is an experienced and famous investor in
Malaysia. Based on 8K's insight, having one million assets in our life
is achievable. Firstly, we need to understand the power of compounding.
The Power of Compounding
If your initial capital is RM10,000.00 and your target is
RM1,000,000.00, all you need to do is to find 7 undervalued businesses
that provide at least 100% potential profits as follows:
0: RM 10,000
1: RM 20,000
2: RM 40,000
3: RM 80,000
4: RM 160,000
5: RM 320,000
6: RM 640,000
7: RM1,280,000
Apparently, this target is achievable.
Time is Money
However, the problem is - how long should we take to achieve 100%
return in one business. This really depends on the ability of your
investment as follows:
Return of Investment rate: 5% -> time taken to achieve 100% capital appreciation: 14 years
Return of Investment rate: 10% -> time taken to achieve 100% capital appreciation: 7 years
Return of Investment rate: 15% -> time taken to achieve 100% capital appreciation: 5 years
Return of Investment rate: 20% -> time taken to achieve 100% capital appreciation: 4 years
Return of Investment rate: 25% -> time taken to achieve 100% capital appreciation: 3 years
Personally, I think the average return of investment rate of
10~15% is achievable by people who are seriously do their homework.
Capital + Time + Compound
With the return rate of 10%, it will take 7 years to achieve
100% capital appreciation. Then, in order to achieve RM one million from
RM10,000, it will take 49 years! It appears that 49 years is a quite
long period of time. Well, there are two ways to address this concern:
1. To increase the initial capital to RM100,000.
Then it only takes 24.5 years (7 multiply by ~3.5 years) to achieve RM1,000,000.
Or
2. To start as earlier as possible
If we started with an initial capital of RM10,000 for investment
from your 10 years old, then we would have RM one million when we
were 59 years old.
Or
3. To improve the capability of investment
If we improved our capability of investment to the average of 15%,
then we would speed-up our return to achieve the target within 35
years.
To Control What is Controllable
However, only the amount of capital and the capability of investment are what we can control.
To increase the amount of capital
We need to have a strong Will-power (for more information,
please find Green Lantern) plus discipline to save our initial capital.
To increase the ability of investment
We need to constantly and never ending learn and practise investment from time to time.
That's all for today. I hope this sharing inspires you to getting
started to learn to be smart consumers (to avoid unnecessary spending)
and intelligent investors, and eventually, achieve financial freedom.
More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our latest sharing.
Written by: Xaivier Chia
P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.
http://xaivierchia.blogspot.com/2013/11/klse8ks-idea-to-achieve-financial.html
李财有方 http://klse.i3investor.com/blogs/lottenlee/blidx.jsp
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