Thursday, September 8, 2011

Learn to Measure Investment by CAGR

Investment simply means CAGR.

Can you achieve your target CAGR (Compounded Annual Growth Rate) over a long period of time?

There are two investment periods.

Period 1: Start Working to Stop Working (retire from full time job/career)
- Start with low income
- Start a family
- Pay for insurance and installment
- Pay for education for children
- Pay for lifestyle
- Prepare for retirement
- Finally, left some for investment

Period 2: Post full time job / career
- 2nd investment period is as important as well as Period 1 because you will have another 20 to 40 years to earn money, by investment

Why investment is so important?
  • Invesment provides an opportunity to live well without hard work;
  • You need to ensure your money work harder than you so you can enjoy living;

What does a young person start invest?
Example -

  • Alwin starts at age of 25 years old. 
  • Start with RM10,000 capital
  • Start with saving of RM150 per month for next 20 years.
  • Gets an CAGR of 10% for next 20 years.
  • How much Alwin have in this investment fund?