Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Tuesday, 22 September 2015

Singapore Finance Minister on Personal Finance - Part2

Following up to our previous post on Singapore Finance Minister on Personal Finance
We decided to do some statistics on how effective the method of prudent financial planning was.
He mentioned using Government Assets to generate Investment Income, and that income can be used to pay for anything as required by the country - a never ending stream of cash inflow.
We think the same would work for financial planning - using your cash/savings, invest long-term, and use the cash inflow to pay for your lifestyle.

GE Effect on STI
Raising of Re-Employment Age to 67

Investment in: Singapore Straits Time Index (STI)
Time frame: 26 Years, 1988 January to 2013 December (we did this research last year actually)
Investment Amount: $50 every month
Invest during last trading day of the month
Assuming 2% annual dividend rate distributed every half yearly
Dividends: Re-Invested into the STI

Over the period of 26 years, $50 dollars investment into the STI every month, at the end of the period, would produced a sum of $33840.46, providing an average annual dividend payout $676 (and growing).
That's an average annual growth rate of 4.08%, excluding the subsequent annual dividend yield of average 2%!

Keeping all conditions the same, if we increase the monthly invest from $50 to $100, the sum of money at the end of the period would be $68,319.85, producing a possible annual dividend of $1366!
The growth rate increases to an annual 4.17%!

Of course, past performances does not guarantee the same future performance, but it does serve as a good gauge on how the future will be like!
So start investing your savings young, keep it consistent, and watch it grow over time to provide you with a money cash inflow!
Stay Tune to Part3 of our post where we will discuss how we can increase the cash inflow from this strategy!

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?

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