Saturday, June 18, 2016


CHALLENGES the fast ageing population face are no longer issues faced by developed countries only. 
Developing countries are fast catching up and Malaysians are not spared.

 In fact, the speed of growth in the number of the aged in developing nations is so alarming that innovative thinking at all levels is needed to address it if we are to avert a crisis.  The Crisis, by the way,  is not in the  aging individuals health or mobility but actually it is in Aging Individuals ability to live comfortably , without  encumbrance & debt free.

At a meeting  in  a local kopitiam with members of my business chamber, I remembered being questioned as  to HOW To BUILD a stronger financial base for oneself. I practically gave away the one Golden Rule  that every  single money manager learns early.  

COMPOUND INTEREST. In today's fast paced world, every single financial instrument you can imagine is invariably ensconced within the parameters of that ONE golden rule.

Big Money is made by  the equation: Money + Time = INTEREST (X Compound Interest).
The Growth of your money can be plotted on an annualized growth chart. The compound annual growth rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer than one year

Especially for the young people, it is good to have an expectation of a growth Rate of between 5% - 7% on your investments/savings in  a medium risk environment. Even if you have your money in a Savings  Account  or under a Fixed Deposit account in your local Bank, you should expect a dividend payout of between 3.75% to 4.25% in our current Malaysian environment (circa 2014- 2017)

At this point, I would be remiss if I do not inform that the Employment Provident Fund (EPF) is by far the best savings outlet for your old age,  as it guarantees its depositors a return of 2% above the current published Inflation Rate.

 Now, coming back to addressing the concerns of the older working generation-Although I have been underweight  on equities or out of stock market since year 2013 , I strongly recommend  to everyone to having an account in the local Stock Market for the purpose of buying and keeping stocks for their annual dividends and warrants , apart from the obvious capital appreciation.

For those  in the older generation who would be touching their hard earned EPF money after the age of 55, and only have a simple idea of keeping their monies in the Bank or under FD...may I suggest you continue leaving it there and if possible keep adding to your money there as the EPF has a provision that allows you to continue depositing up to RM 60,000 per year.

You may write annually to the EPF to only divest your annual interest to you  for your budgeted usage and expenditure and maintain your "POKOK' to give out  "BUNGA" in perpetuity.

The whole point is: never lose your base accrued money  and only live off your interest earned so that  you can continue stay in the game.

As for those with a taste for  higher risk - try to cap your  investments to those within the 10%-12% returns as anything higher than that is always suspect.

One important rule to remember when you reach age 55 is really avoiding stupid mistakes. How many of us wasted too much time that we will not be able to replenish once it is gone.It takes a man to 30 years to build up a foundation to be ready to play the biggest game in one's life. The real game starts at 50s.

Moving forward, this writer would like to impress upon his readers that what we do after 50s is  also very important. Most people may be thinking of starting to spend what they have, thinking their days were numbered and better be happy and partying like there is no tomorrow.  But, what if your life is looong?

This is where  a paradigm shift in our Financial Thinking is required. Problem is, many people have no experience with money, much less investment knowledge. So, we need to understand how COMPOUND INTEREST  works to our benefit.

To many, we may have worked very hard for 30 years and while we were thinking going into retirement and start spending all the hard earned money, consider hoarding it for another 30 years. It will produce wealth that is so big that we never imagined it possible in our lifetime. :)

Researching  the history of  Mr.Warren Buffet indicates that the most profound things about  his life is that he wasn't  always so rich.   In his case, it would appear that Life of super rich building begins at 50s. 

Take a look at this chart of how Warren Buffett's nett worth increased over the years. 
Warren Buffett's  nett worth is close to about USD 67 billion when he is at his 80s, representing the gains of almost 99% after the age of 50 years old. 

By  his 50s,  he was evidently well off, but what he did with the foundation that he builds up was really amazing.

"My wealth has come from a combination of living in America, some lucky genes, and compound interest." – Warren Buffett
Time and compounding interest are truly very powerful forces in the universe. I guess I have just witnessed that.

We may not be able to replicate what this man has done but I am certainly learning a few things from him. 

For sure, we may not be a billionaire by the age of 80's but for sure we got a shot of being a millionaire. 

If we don't screw up and continue to live prudently, at 10% compounding return, our net worth will grow staggering to over 17 million by the time we reach his age. 

The question is: DARE WE DREAM THAT ?

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The Malacca Story (Chinese version)

with courtesy to asmaliana-BPP

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