31 January 2013

200 Investment Rule

I always try to simplify the rule of investment to be very easy to be remembered. One of the Investment Rule I like is 72Rule. It applies to the number of years to take to compound given the return rate. For example, if you are earning 10% a year, it takes about 7 years to double up your portfolio. If you are earning 8% a year, it takes about 9 years to double up your portfolio. It is a simplified version of course.

So what is this 200 Investment Rule about? I always use 200 times monthly expenses as your required retirement capital. For example, if your monthly expenses is 5,000.00, you would need to prepare for at least 1,000,000.00 or 1M for your retirement fund.

Why am I saying so? This is because if you could find a 10% compound annual return investment tool, so you could generate 100K per annum or around 8K per month for 1M portfolio. You could still save another 3K per month for re-investment purpose.

I do see a lot of retired person who just relies on their invested portfolio to enjoy their retirement life. Of  course, if you do not want to leave lump sum to your children, you may donate the retirement fund to any charity or foundation you like.

Life is beautiful. Enjoy it.

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