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Money in the Bank- More Risky Than Citibank Shares


bishanpoemsboothWhat have you been doing for your financial freedom?

If you have been very disciplined and frugal, saving every penny you can find, while putting the money in the bank, you will find that come retirement, your savings isn’t worth much.

Using my favorite =FV formula in excel spreadsheet, you can create this simple table as shown below:

Investment Bank savings

total sum 50000 total sum 50000
% returns in investments 5.00% % returns in bank account 0.03%
no. of years 30 no. of years 30
Compounded returns $223,387.22 Compounded returns $50,376.41

The difference is very stark. A doable 5% return from investment will yield you a return of $223,387. Warren Buffett can get slightly over 20% yearly on his investments for 40 over years but he’s in a league of his own :) Any investment advisor that tells you that he can do as well or better, steer well clear of him or her.

However, if you had take the ‘less risky’ path and put every thing in the bank and take the paltry bank savings interest rate of what is around 0.03%, you will get $50,376.

A miserly return of investment of $376 for 30 years.

If you had invested in something that yielded just 1% just for 1 year, you would have gotten a return of $502, which is higher than putting in the bank for 30 years.

So if you want a more comfortable retirement, you should look to work your savings harder than putting it all in the bank. In this case, taking some risks is essential for preparing for your retirement and you have to start right now.

What if you had just left the money in the CPF ordinary account which yields 2.5%? This $50,000 would have become $105,767.45 Double your initial investment of $50,000.

Does that mean that you should start putting money and your savings in CPF?

Nope, since you cannot touch that until retirement. Instead you should look to put aside some money to invest in index funds, ETFs and buy stocks and shares.

Put aside around 3-5 months of your expenses in the bank account for emergencies and invest the rest that you manage to save.

If you are feeling lucky, just get some Citibank shares and it will be better than putting them in the bank account.

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The information contained in this blog is prepared from data believed to be correct and reliable at the time of publication of this report. The authors do not make any guarantee or representation as to the adequacy, accuracy, completeness, reliability of the information contained herein. Neither the authors or any affiliates or related persons shall be liable for any consequences (direct or indirect losses, loss of profits and damages) of any
reliance placed on information provided in the blog.

Shares and financial instruments illustrated in this blog can go down sharply or in certain instruments suffer total loss on the initial investments. Investors are advised to make their own judgment on the information provided and consult their own financial advisors or consultants as to the suitability of the products illustrated to their particular financial needs and objectives before acting on any information contained herein in this blog.