Time Value of Money


When we are talking about investment, we always try to find the best one that provide the highest percentage of return with the lowest risk. The search for this holy grail sometimes put significant delay into our investment journey. We thought the money will work harder once we found the correct investment for us. We never realize that the time lost really cause us to lose money. The graph that I take from Kakti’s blog might be the best way to explain the time value of money.

Time Value of Money

Although he save RM1,000 a year for the next 38 years, he still cannot match the amount of money that Bonnie gets for saving only 10 years at the early age of 18. The earlier you start the lesser amount you have to save and you don’t have to seek a very high interest rate.

So to me, the best time to invest is not when the market is high, low or whatnots, but the best time is now.

  1. #1 by RU5H on May 30, 2007 - 12:47 am

    Informational blog and great topics u got goin on here!!!

    I was just wondering whether is there a formula to count compound interest + annual investment as shown in the graph above? Bear in mind.. not the normal compound interest.. but with the annual investment.. i found one.. but it juz doesnt seem right..

    it would be great if u could a piece on this?

    keep it up!

  2. #2 by Irwan on June 1, 2007 - 12:49 am

    the best way to calculate this kind of thing is by using excel. I think my ASB calculator can do that for you. put zero for ‘RM add per month’ and ‘Average ASB Bonus rate’.

    then adjust your annual investment and your expected return.

    http://www.irwan.biz/asb-calculator-v2/ASB Calculator

  3. #3 by kaklong on June 23, 2007 - 12:32 am

    nice one irwan! i’ll start now. Hehe. By the way~ this makes me remember engineering economics.

  4. #4 by Irwan on June 23, 2007 - 1:35 am

    haha.. you know what, Eng Econ is my best class so far. it was in my first semester. all things about it are so nostalgic, 9am class, take home lab, work-it-together homework, dr. Abel, our TA Abro Ganggul. it reminds me to my first morning snow too, wearing timberland boot, crushing the ice while in sleepy morning walk. all this make me wanna have my first sem again.

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