Latest news with #Ruleof72
The Sun
26-05-2025
- Business
- The Sun
No shortcut to wealth
IN the age of social media, self-proclaimed 'investment gurus' are everywhere – often flaunting eye-catching profit screenshots and bold claims of life-changing returns that leave their followers spellbound. Even more alarming is the use of AI technology to mimic well-known investment influencers, luring followers into so-called 'investment groups'. Unfortunately, some of these promises have led to significant financial loss. What appears to be free advice often comes with hidden cost. It is crucial to approach such content with a healthy dose of skepticism. The goal of many of these so-called gurus is not to teach you how to make money but to profit themselves – often at the expense of their audience. Countless people, including everyday individuals and professionals, have suffered significant losses. This raises an important question: Why do people fervently believe in these gurus and fall into such traps? Many mistakenly view investing as a kind of magic – believing that finding the right guru will lead to overnight riches and lasting financial security. Unfortunately, this mindset is not only misguided but also potentially dangerous. It is important to remember that the true essence of investing is wealth preservation. While investments will not make you a millionaire overnight, they can help you combat inflation and safeguard the fruits of your labour. According to the Rule of 72, with an inflation rate of 5%, your wealth would lose half its value in less than 15 years if left uninvested. While investing is essential for preserving and growing wealth, promises of double returns or 'get-rich-quick' schemes should be treated as red flags. The true power of investment lies in compound interest – the ability to earn returns on your previous returns over time. Warren Buffett became one of the world's most successful investors not through some mysterious skill but by understanding and harnessing the power of compounding. He started investing at a young age and consistently held high-quality assets for the long term. Even with seemingly modest annual returns, decades of compounding transformed his wealth to staggering levels. However, Buffett's wealth did not truly take shape until he was 65. His methods are public and straight-forward, yet many refuse to follow them because they cannot accept the idea of steady, long-term growth. The core of compound interest lies in time, not short-term high returns. Like personal growth or building a career, wealth accumulation is a gradual process. There are no shortcuts, only sound decisions repeated over time. To avoid falling victim to false promises, the first step is a shift in mindset. Investing is not about chasing big gains; it is about protecting your wealth. The real goal is defence, not offence – shielding your assets against inflation and uncertainty. Many people mistakenly equate investing with stock trading or speculation. In reality, true investment should prioritise stability, focusing on asset allocation and risk management. Last year, Malaysia's official inflation rate was expected to average between 2% and 3.5%. To stay conservative, we doubled this figure, setting a target return of 5% to 7%. Achieving or slightly exceeding this target is sufficient as higher returns often come with higher risks. When investment is viewed as a form of self-defence, it becomes possible to navigate the complexities of financial markets successfully. Investment can become your financial self-defence. Instead of chasing hype or jumping on every trend, focus on deepening your understanding. Your perspective will shape your actions and your actions will determine your destiny. Some hustle tirelessly yet end up with nothing while others observe calmly and reap the rewards. May we all choose the latter – investing wisely, thinking critically and protecting the wealth we have worked so hard to earn. Dr Lee Chee Loong is a member of the Active Ageing Impact Lab and a senior lecturer at Taylor's University. Comments: letters@
USA Today
13-05-2025
- Business
- USA Today
Is your money market fund too expensive? Why high fees may (or may not) be worth it.
Is your money market fund too expensive? Why high fees may (or may not) be worth it. Show Caption Hide Caption What is a stock and how does it work? Buying stock can be a smart way to invest and, hopefully, make more money over time. If you're parking cash in a money market fund while waiting for recent market volatility to subside, you might be paying dearly for that safe spot. Many money market funds still carry high expense ratios, which are management fees expressed in a percentage. The average money market fund fee is 0.38%, which is sharply higher than the 0.05% average fee on an index equity mutual fund, according to the Investment Company Institute (ICI). That means, on average, you'll pay $38 annually for every $10,000 you have invested in a money market fund compared to $5 for the index equity mutual fund. Investors should be aware of this, so they don't fall into the trap of overpaying to hold cash. What is a money market fund? A money market fund is a type of mutual fund that invests in short-term, high-quality debt securities such as T-bills and certificates of deposit. Money market funds aim for high liquidity and stability. How can investors find lower fees? Look beyond your broker. 'Brokerage firms often limit investors to selecting from a menu of money market funds managed by the brokerage firm,' said Michael Brenner of FBB Capital Partners. 'If your broker offers you access to third-party money market funds, those may come with lower fees.' Try an exchange-traded-fund (ETF). 'Consider using a low-cost ETF which has underlying investments that are very similar to your money market fund,' Brenner said. 'Those ETFs may carry much lower fees than a similar money market fund. Bond Index ETFs have fees that average around 0.10%.' Are lower money market fund fees the answer? While looking for a cheaper money market fund isn't a bad idea, some money managers say people should only be using money market funds short-term, anyway, unless they're elderly and worried about loss. 'The big rip off is if you're using them for anything more than short-term because you're not growing your money,' said Ronnie Gilliken, president and chief executive of Capital Choice of the Carolinas. Money market fund rates aren't typically enough to fulfill the "Rule of 72" over a short timeframe, he said. The Rule of 72 is used to estimate how long it will take to double your money. Divide 72 by the interest rate (as a percentage) to get an approximate number of years it will take to double your money. The average yield for money market funds is currently around 4.14% based on data from the ICI Fact Book for 2025. What about fees in general? But while money market fees should be noted, investors should resist the urge to solely use fees to decide whether to invest in something or not, Gilliken said. Instead, people should focus on net returns, he said. Otherwise, people could end up eliminating outperforming funds from the outset. Take for example, a $10,000 investment in 1976, when Vanguard launched its first low-cost Vanguard 500 Index Fund. The Fund had an expense ratio of 0.14% when it was launched and has dropped now to 0.04%. That investment would have netted you $1,704,343 if you'd maintained it through 2023. Compare that to the $2,455,295 you would have earned had the money been invested in the five U.S. equity-focused American Funds available at the time, American Funds said. Since that's a net return, it includes the deduction of the maximum sales charge of 5.75% for equity funds, according to American Funds. The difference is that before buying stock of a company, analysts from the mutual fund company will visit the company, meet the chief executive and the board, get the company's financials, tour a factory or production areas, do data analysis versus the competition and if it's in a foreign country, assess political risk and legislation, Gilliken said. 'That's all included in the expense ratio,' he said. 'An index is just a thermometer of what is going on' but doesn't look at each individual company. 'Just because the company's big and in the index doesn't necessarily mean you should own it.' Sometimes, some experts say, a slightly higher expense ratio can be worth it. Energy company Enron was in the S&P 500 but went bankrupt in the early 2000s after widespread accounting fraud, misrepresenting its financial performance and hiding billions of dollars in debt, was discovered, he noted. Research, including from the famed Wharton business school, has shown 'active' investment managers often aren't able to pick enough winners to justify their high fees. However, if you can find one who can, sometimes, 'we deserve our compensation,' Gilliken said. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
Time of India
03-05-2025
- Business
- Time of India
Is Rs 5.6 crore enough to retire? Bengaluru founder says think again and shares two key warnings
In today's fast-paced world, the idea of retiring early is no longer just a dream for the lucky few, it's a growing ambition among working professionals who crave more control over their time, energy, and lifestyle. Whether driven by burnout, personal passions, or the FIRE ( Financial Independence , Retire Early) movement, the conversation around early retirement is getting louder. But in this era of rising costs and longer lifespans, are we relying too heavily on old thumb rules that might no longer fit? #Pahalgam Terrorist Attack India strikes hard! New Delhi bans all imports from Pakistan How Pakistan is preparing for the worst as India weighs response If India attacks Pakistan, China & B'desh should seize 7 NE states, says Yunus' aide Bengaluru-based founder Anmol Gupta has a word of caution, don't use the popular 4% rule as your sole compass to plan retirement, especially if you're eyeing an early exit from the workforce. What is the 4% rule? At its core, the 4% rule suggests that if you withdraw 4% of your investment corpus every year, your money should last about 30 years. In simpler terms, if you have saved 25 times your annual expenses, you could theoretically retire and sustain your lifestyle. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Riyadh Modular Homes: See Prices Mobile Homes | Search ads Undo For instance, if your annual expenses are Rs 10 lakh, then accumulating Rs 2.5 crore (Rs 10 lakh × 25) would, according to the rule, be enough to see you through retirement. Sounds reassuring, right? Not quite, and that's where most people go wrong. You Might Also Like: How to retire without ever retiring? Akshat Shrivastava's explains his life upgrade formula Why the 4% rule isn't one-size-fits-all Gupta highlights two crucial flaws in applying this rule blindly. 1. It assumes a 30-year retirement window The 4% rule is best suited for those retiring at the conventional age of 55–60, where the retirement span is roughly three decades. But if you're planning to retire in your 40s or even 30s, you're looking at 40–50 years without a steady income. In that case, 25x your annual expenses may fall dramatically short, you'll need a significantly larger corpus to avoid running out of money later in life. 2. It ignores the impact of inflation One of the most common mistakes while calculating retirement needs is using today's expenses instead of forecasting inflated expenses at the time of retirement. That's a critical oversight. Let's break it down with an example Gupta shares: - Current expenses: Rs 50,000/month (Rs 6 lakh/year) - Current age: 30 - Target retirement age: 55 - Inflation rate: 6% Using the Rule of 72, which states that your expenses will double roughly every 12 years at 6% inflation, your Rs 6 lakh/year expense will become around Rs 24 lakh/year by the time you're 55. That means your retirement corpus should not be based on Rs 6 lakh/year, but on Rs 24 lakh/year. Applying the 4% rule then: Rs 24 lakh × 25 = Rs 6 crore. So, if you're aiming to retire at 55, you'd need at least ₹6 crore — not ₹1.5 crore as the unadjusted 4% rule might misleadingly suggest. Ditch the thumb rule, embrace smart tools While the 4% rule might serve as a good starting point or a back-of-the-napkin calculation, Gupta urges individuals to go beyond it. In an age where AI-powered financial planning tools are just a few clicks away, why rely on decades-old shortcuts?
Yahoo
02-05-2025
- Business
- Yahoo
Top tips for investing in a mutual fund
(NewsNation) — Time is money, and money is investable. One investment strategy is to purchase a mutual fund. A mutual fund is an investment strategy in which you pool your money with that of other investors to buy stocks, bonds and other securities, according to Fidelity Investments. Investors who purchase a mutual fund own part of the fund's assets. If you sell a security the mutual fund invests in at a higher price than what you originally paid, you make a profit, called a net capital gain. You can also earn money from mutual funds when a security pays interest or dividends. A security is a broad term for assets that hold monetary value. What is the difference between an ETF and a mutual fund? To invest in a mutual fund, you must first set up an online brokerage account. Common financial service companies that manage these accounts include Fidelity Investments, Vanguard, Charles Schwab and Ally Invest. Then, you'll need to deposit money into your account to be able to purchase a mutual fund. Research the funds to ensure they align with your goals, considering the fund's performance and risks. Track your portfolio and adjust your strategy as needed. What is the Rule of 72 in investing? Does the mutual fund align with my long-term financial goals? During the research stage, identify your goals and ask yourself if what you're about to invest in makes sense for you. Experts at Bankrate suggest beginners invest in a low-cost S&P 500 index fund. What is this fund's long-term performance? You're investing because you want to gain in the long run. Take the fund's past performance into account to help determine whether its success will continue. What are the fees associated with buying a share in a fund? 'Remember that if two funds have the same investment performance, the one with the lower fees will leave their investors better off,' Bankrate said. Don't forget about tax season. 'Consider the fund's tax-efficiency and whether you're going to hold it in a tax-advantaged account — like your 401(k) — or not,' according to Charles Schwab, a financial services company. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Epoch Times
28-04-2025
- Business
- Epoch Times
What Is the Rule of 72 and How Can Investors Use It?
By Charles Lewis Sizemore From Kiplinger's Personal Finance If you've dabbled in investing, you've likely heard of the 'Rule of 72.' It's a back-of-the-envelope metric for calculating how quickly an investment will double in value. Most financial metrics are too complex to be done in your head. You'd likely need a financial calculator or a spreadsheet to calculate the internal rate of return, yield to maturity, or common risk metrics like beta or standard deviation. The beauty of the Rule of 72 is that it can be calculated by the average 10-year-old. Let's take a look at what the Rule of 72 is, how it works and how it can be used in investing and financial planning. What Is the Rule of 72 in Simple Terms? The Rule of 72 is a straightforward formula that provides a quick-and-dirty approximation of how long it will take for an investment to double in value assuming a fixed annual rate of return. It's a solid tool for estimating the effects of compound interest and can be used to gauge the potential growth of your investments over time. Related Stories 3/5/2025 7/6/2024 The formula for the Rule of 72 is incredibly simple. You divide 72 by the annual rate of return you expect to earn on that investment. For example, if you expect an annual return of 9 percent, it would take approximately eight years for your investment to double (72 divided by 9 equals 8). What Are Specific Examples of the Rule of 72? Getting more concrete, let's say you own an S&P 500 index fund and you want to map out a few scenarios. If the index rises at its historical average of around 10 percent, you'd double your money in about 7.2 years (72/10 = 7.2). If you believed that the S&P 500 is more likely to return, say, 15 percent due to strong earnings or continued tailwinds from the best AI stocks, you'd double your money in 4.8 years (72/15 = 4.8). And if you believed the S&P would return a more mundane 5 percent due to, say, a recession, you'd double your money in 14.4 years (72/5 = 14.4). In 2024, the S&P 500 generated a total return (price change plus dividends) of 25 percent. The Rule of 72 would suggest your investment in the S&P 500 fund would double at that rate in 2.9 years—but that's assuming that rate of return stays constant. At last check, the S&P 500 was down 1.5 percent a quarter of the way into 2025. The Rule of 72 can also be used to assess the impact of inflation on your purchasing power. If you want to determine how long it will take for the purchasing power of your money to be cut in half due to price pressures, you can use the same formula. Let's say the inflation rate is 3 percent. You could divide 72 by 3 to get 24 years. Assuming a 3 percent rate of inflation, your purchasing power would be cut in half in 24 years. The most recent Consumer Price Index report put headline inflation at 2.8 percent on an annual basis. Using the Rule of 72 at that rate, your purchasing power would be cut in half in 25.7 years. But, again, that's assuming the inflation rate stays the same. Why Should I Use the Rule of 72? The benefits of the Rule of 72 are obvious. It's a simple formula that anyone with elementary school math skills can calculate. It doesn't require a Wharton MBA or CFA Charter. It also allows you to set realistic expectations for your investments and can help you determine whether your financial goals are achievable within your investment time frame. You can also use the Rule of 72 to compare different investment options. For instance, if you're deciding between a stock fund and a bond fund with two very different expected returns, the Rule of 72 can help you assess which one gets you to your financial goal faster. Remember, though, the Rule of 72 is designed to be a rough estimate and its assumptions aren't always realistic. It assumes a constant rate of return, and stock returns are anything but constant. The average return is far from indicative of the return you're likely to get in any given year. It also doesn't account for taxes, fees or other expenses that can chip away at your returns. And, like all financial models, it's only as good as its inputs: garbage in, garbage out. While by no means a comprehensive analysis, the Rule of 72 is a useful tool that provides a quick and easy way to estimate the time it takes for an investment to potentially double. It's valuable in financial planning and in comparing investment alternatives. And it's something even someone new to investing can put to work. ©2025 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
