Sunday, August 12, 2007

Build up a nest egg of $1 million

You can build up a nest egg of $1 million by saving only $300 a month over a working career of 40 years.

If you invest this money to earn an average return of 8% per annum, it will accumulate to $970,000 over 40 years.

If you earn 10% per annum, it will accumulate to $1,673,000 over 40 years.

By investing in a large, well diversified fund of equities, the average return over a long period has been around 8% to 10% per annum.

If you invest in a low cost fund, the charge could be as low as 0.5% per annum. This allows you to keep most of the return for yourself.

However, if you invest in a high cost fund that takes away 2% per annum, you may have 30% of the total money disappear.
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5 comments:

  1. AnonymousAugust 12, 2007 2:25 PM

    Dear Mr Tan
    What is the low cost fund that charge only 0.5% per annum.
    Can you give us the name of the fund and also where/who can we purchase it from ?
    It could be great if you could let us know. I believe this product is definitely not from NTUC Income, having heard so much upfront cost charge by the agent on their ID2 plan.
    Thank you.

    ReplyDelete
  2. AnonymousAugust 13, 2007 4:54 PM

    Hi Mr Tan,
    Most of the fund in the market are at least 1% p.a. If we are losing 15% to 30% of our total money if fund cost is around 1 to 2%, shld't we not invest in most of these fund at all? Appreciate yr guidance.
    Rgds

    ReplyDelete
  3. AnonymousAugust 13, 2007 7:28 PM

    If you are still considering NTUC ILPs, you can ask its business center if the ID7 plan (which doesn't charge agent fee, but charges a maintainance fee of $4/mth) is still available.

    If you are looking at pure investment funds (i.e. no insurance component), you can check out Best Low-Cost Funds at http://www.askdrmoney.com. Note that you can get some of the funds at a even lower initial commission if you are comfortable with online transactions.

    Although not listed there, UOB Growthpath 2030 and 2040 funds (which are in the medium to high risk range) seem to have low costs too.

    ReplyDelete
  4. Khiat Han Hwee AdrianAugust 14, 2007 11:20 AM

    Projecting a returns of 8%-10% with $300 monthly savings might be a bit optimistic.

    For a Global Diversified Equity Fund on a regular contribution basis, I feels that its more prudent to use 5%-7% for projection.

    Nevertheless, review your returns with your adviser regularly, probably yearly, and rebalance your portfolio when you meet him/her.

    ReplyDelete
  5. Yong KiatSeptember 06, 2007 7:37 PM

    Dear Mr Tan,

    Is this profile achievable?

    Yong Kiat @ Wealth Creation

    ReplyDelete