Hello my dear friends,
I hope you have all enjoyed the new year and are inspired to continue 2013 with new ideas, courage and determination. How are you going to enjoy more wealth this year? Let's look at some of the traditional ways to increase our wealth.
Saving money
This is an easy and important way of accumulating money. You can open a savings or fixed deposit account which pays you an interest. By regular deposits in a savings account over a long period you can build up your money to pay for a degree, car or house down payment. This requires discipline and consistency. If you put in a lump sum in a fixed deposit with a good interest your money will grow steadily. It is good to know about the power of compound interest when deciding where to invest your money. The power of compound interest will come into play only if the money saved is not touched during the period of investment. For example:
You want to invest $30,000 for 10 years at an estimated rate of return of 9 per cent. The
lump sum you will receive at the end of the 10 years would be:
$30,000 (principal amount) x 2.367 (c0mpound factor from table) = $71,010
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Keep a compound factor table with you at all times for easy reference. You can just make a few copies of it and keep a copy in your handbag, brief case, office drawer or home study table.
You can have more than one savings account for specific purposes such as an education fund for your child, travel account for good holidays abroad, retirement fund and emergency fund. And it goes without saying that you don't dip into these individal savings except for the that specific expenditure. But don't have too many accounts that you are unable to manage or keep track of them.
Investing in the stock market
The safest and surest way to earn money in the stock market is to buy shares from public listed companies which have a good track record or which are known as blue chip counters. For example if you bought 2 lots of shares in a well managed company 2 years ago, now your shares may be worth more and you could have also have received annual or quarterly dividends. So not only do you earn profits but your capital investment also grows.
2011 January - 2000 shares in xyz company bought for = $5000/-
2013 January - 2000 shares in xyz company now worth = $6400/-
2011- 2013 - Dividends earned = $200/-
2011-2013 - Total profit = $1400 + $ 200 = $1600/-
From the above we can see that the profit earned is 32% which is much more than one can earn in a savings or fixed deposit account. However that does not mean that one should not have a savings account. Savings are a must for emergencies and rainy days.
But the above is just an imaginary example. How your stocks perform will depend on the market trends. Markets are sometimes described as 'bearish' to describe a sluggish market (well bears trudge along slowly right?) or conversely 'bullish' to describe an active market (bulls like to charge at full speed isn't?).
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Investing in the stock market can be very rewarding provided you are well informed about the companies you choose to invest in. You can do this by reading their annual reports and keeping abreast of their performances, online, in financial newspapers and magazines. You should never invest based on rumours and many have been financially ruined because of this. Educate yourself about the stock market and invest wisely, be patient and prudent to see good returns. You can also reinvest dividends earned to increase your investments.
Property
There are many people who have multiplied their money a hundred fold by buying property as an investment. They use their initial savings to make a deposit on a property and then lease out the property. The rental received is used to pay the installments on the bank loan taken to buy the property.
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| www.realwealthatlantic.com |
Insurance
Nowadays medical and life insurance is not a choice. It is a necessity. You may think that your money is being wasted on a medical insurance but in fact it is an investment in giving you and your family protection in times of sickness and accidents.
I want to share a true story with you that happened two months ago. My friend who is an insurance agent had been trying to sell a personal accident policy to his neighbour for three months. The neighbour worked as a security guard for a jewellery store. One day the security guard went to work as usual. At around 3pm armed robbers attacked the store and shot the guard. He died on the spot. He left a widow and a seven year old son. If only he had bought the insurance which cost $280 a year his family would have received $200,000 and this would have given some comfort for his grieving widow and could have been invested for his son's university education.
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| wisdom of life - robert.foo.my |
Insurance nowadays are investment linked which means that part of the premium paid is invested in different kinds of funds depending on what fund you choose and your tolerance for risk. Again it is important that you research the insurance company you are interested in before you buy a policy. There are some very established insurance companies which give you excellent coverage and after sales service.
I have policies with Prudential and I have found that this is one of the best choices I made. Recently I was admitted in hospital and within an hour my medical card was accepted and all my medical expenses were born by Prudential. I also claimed for medical expenses incurred 30 days prior to the admission and 90 days after the admission and these were also paid to me by Prudential without any hassle.
Social Security, Employees Provident Fund and Central Provident fund
Another important form of savings is the Employees Provident Fund which is compulsory in many countries. A portion of the employee's salary is deducted on a monthly basis and a bigger contribution from the employer is added to this monthly contribution. These compulsory savings earn compound interest and a substantial amount of money accrues to the employee at retirement age and part of it may be withdrawn even earlier. Some countries allow personal contributions for the self employed such as business owners and professionals. By diverting some of your savings here you may receive more compound interest than is given by banks. Those of you who are self employed can opt to save money regularly this way.
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Well my dear friends I am not a financial wizard but I have accumulated money by saving, prudently investing in the stock market and property. I have avoided medical expenses by being insured. Remember a penny saved is a penny earned. Do learn as much as you can from prudent friends on how to invest wisely, read up on investing, attend talks and short courses if you can afford to. That's all for now. Next time I will talk about the different kinds of wealth.
Wishing you all a prosperous and fulfilling year ahead!
Warmest regards and love,
