May 25, 2014

Cory Diary : No Earning Money is Losing Money

Continued from my earlier Damn to Saver article, with the continued QE though tapered and expectation of long term low interest rates, high inflation will continue to stay with us one way or the other. Nevermind about the statistics from any governments.


Compounded 2.5% inflation across 5 years,
Years Principal Inflation Rate Purchasing Power Principal Reduction
5 $10,000 -2.50% $8,811 -11.89%

Compounded 4% inflation across 5 years,
Years Principal Inflation Rate Purchasing Power Principal Reduction
5 $10,000 -4.00% $8,154 -18.46%

what this means are you need to deduct probably 20% profits you made from the past 5 years just to break even after fixed interest returns are taken into consideration. So don't start patting yourself on the back yet till you are earning way above it.

For those who has Stayed on the sideline Mainly, good luck to you !

Cory
25th May 2014

May 17, 2014

Cory Diary : Investment in STI Index



Year
1988 1989 2013
Annual Capital Injected
$6,000 $6,300 $20,318
Years Invested till 2013 ended
26 25 1
Capital Value
$20,269 $17,339 $18,714
XIRR
3.19%


Today my mind Experiment is Simple. I do a capital injection annually into STI Index starting from year 1988. Injected amount grows at 5% annually.

In Year 1988, i injected 6K which grew to $20,269 after 26 years. In start of year 2013, i injected $20,318 which register a loss to $18,714 within the year. When i total up all my investments, the Compound return is 3.19% over 26 years.

This implied for $100,000 investment at 3.19% compounded will arrive a figure of $226,244. This return excludes Dividend. If i include 3.5% Annual dividends, a potential figure of $538,538. 

This exercise tell myself that to invest in STI Index, Dollar Cost Averaging investment is critical imo. The logic is pretty simple. I got more shares at lower STI. Fewer shares at higher STI.

When STI moves up, more shares benefit. When STI moves down, less shares impacted. Furthermore Stocks will grow with inflation as there is business behind, which mean STI is biased towards higher long term. If all this deductions hold true, it seems to be a viable plan.

Thoughts ?

Cory
17th May 2014

May 3, 2014

Cory Diary : Damn to the Saver with Fixed Deposit

There are people who are believers of Saving and Fixed deposit.
Here's the Math for them.

Assuming I strike lottery $1M dollar on 1st Year. The next year I start to lose $29,100 due to loss of purchasing power. Many people cannot even save that amount of money to compensate for the yearly loss.

Year Principal Fixed Deposit Inflation Effective Purchasing $
1 $1,000,000 1.00% 4.00% -3.00% $970,000
2 $1,000,000 1.00% 4.00% -3.00% $940,900
19 $1,000,000 1.00% 4.00% -3.00% $560,613
20 $1,000,000 1.00% 4.00% -3.00% $543,794

Continue my way till Year 19th. Original $1M left with $560,613. On the Year 20th, I will lose another $16,819 that year.

Conclusion
The more money I have the more I lose. I will never be able to retire early.


Cory
3rd May 2014

May 2, 2014

Cory Diary : A Proper Business Behind

Have been a little slow in conceptualizing my Investment Strategy this year. It has change with wisdom and climate over the years. Yes i do review my plan often and usually i could identify a theme behind it.

Here i go - 

Business focus on sustainability, reasonable dividends and little debts. 

A little emphasis on some growth will be nice. Profitability is required and FCF a checking step. Dividend a must. ROE level should be sufficient. Notice i did not put exact figures behind it. I realized this is an Art rather than a Science.

Niche product or services will be perfect. A check on my portfolio seems sub-consciously along that line. Wish me luck !


Cheers

Cory
02 May 2014