How to Become a Multi Millionaire
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Did you know that if you had purchased 1,000 Public Bank shares since 1967 and have held it over a period of 42 years, your initial investment would have grown to a value of RM2.1M today!
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This what I extract from Public Bank 2007 Annual Report:
“A shareholder who bought 1,000 Public Bank shares when it was listed in 1967, and assuming the shareholder had subscribed for all the rights issues to date and had not sold any of the Public Bank shares would have 129,730 Public Bank shares worth RM1,427,030 based on the Public Bank (Local) share price of RM11.00 at the end of 2007 and received a total gross dividend of RM487,902 over the 40-year period.
This works out to a remarkable annual rate of return on investment of 20.6% for each of the 40 years since Public Bank was listed in 1967”
“A shareholder who purchased 1,000 Public Bank (Local) shares at RM4.54 per Public Bank (Local) share at the beginning of 2003 and held it for 5 years to the end of 2007 would have received gross dividends totaling RM3,955 over the 5-year period and would have 1,250 Public Bank (Local) shares as at the end of 2007.
This is equivalent to an exceptionally high annual return on investment of 36.4% for each of the 5 years from 2003 to 2007 based on the share price of RM11.00 per Public Bank (Local) share as at the end of 2007.
Fast forward today:
If I use today closing price of Public Bank shares which is RM12.00 then estimate worth is over RM2.1M today
129,730 Public Bank shares X RM12.00 = RM1.6M
Dividend received = RM487,902
Total Estimated Value today = RM2.1M
This is the Power of Of Compounded Returns To Equities Investing!
What is compound interest?
Albert Einstein describes compound interest as the most powerful force in the universe.
Compound return is achieved when you invest a sum of money at a particular rate of return. Instead of taking out the interest earned after a year, you add it back to the principal sum and reinvest this larger sum. For next year, the rate of return is on a larger principal sum. This continues until the returns a year become greater and greater!
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Investment Finance Tips : What is Compound Interest?
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Two Main Basic principles for the Compounding Power to Work:
1) Have Patient.
It take time in order to see the wonders of compounding returns from $$ to become Million. If you are looking for fast money then forget about getting compounding returns.
Therefore, your probability of become Multi Millionaires is higher if you start early and young, invest wisely and leave your money to growth over the long term period.
2) Start Now
Never procrastinate and the sooner you start, the better. You need to have time factor to work for you in order to make compounding work.
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Investment Advice : How to Calculate Annual Compound Interest
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Annual compound interest is calculated by adding the extra debt to the total amount. Learn the dangers of paying annual compound interest with this free video from an experienced floor trader on investing.
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I totally agree with Alan on the power of compound interest. The question is why most people fail to realise the full power of it. Based on my experience, it is very hard for our human brain to calculate and visualise the compounding effect of interest or ROI.
This is especially clear when I presented roadmap to financial freedom to my clients. Most of them are surprised to see how 1% increase on ROI can make a difference to their financial freedom goal. That’s why I always suggest that we need to have a roadmap to financial freedom to effectively and efficiently achieve our financial freedom. With the roadmap, you will get to see how each 1% increase in your investment ROI will impact your financial freedom. From there, you can set a optimum investment ROI target. This optimum ROI will not too risky and also not too low to achieve your goals.
Let move on….
discover what to Buy now!
Public Bank and Nor Mohamed win awards
KUALA LUMPUR: Public Bank Bhd and Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop were handed the Evolutionary Award and Visionary Award respectively under the Six Heritage Hall Awards.
Meanwhile, CIMB Investment Bank Bhd swept all the awards under RAM League Awards, emerging as the clear winner in terms of number of bonds issued and value in both bonds and sukuk.
The awards were given in a gala dinner that was organised by RAM Ratings in conjunction with its 20th anniversary, feted the nation’s elite in the bond market with its prominent League Awards and newly-introduced Heritage Hall Awards.
RAM League Awards is the only form of national recognition that honours and pays tribute to the industry’s innovative thinkers and forerunners.
The Heritage Hall Awards, which is added to the League Awards, aims to honour trendsetters, groundbreakers, visionaries and risk-takers who have distinguished themselves through outstanding contributions of lasting and historical significance to the Malaysian capital market industry.
PG Municipal Assets Bhd walked away with Originality Award, YTL Power Generation Sdn Bhd nailed Trendsetter Award, Sunway City Bhd clinched the Inspirational Award while Sabah state government bagged the Genesis Award of the Heritage Hall Awards.
For Lead Manager Awards 2009 under the Number of Issues categories, CIMB Investment Bank Bhd won first place, followed by RHB Investment Bank Bhd and AmInvestment Bank Bhd.
Under the Programme Value category, first place was won by CIMB Investment Bank Bhd, followed by AmInvestment Bank Bhd and RHB Investment Bank Bhd.
CIMB Investment Bank Bhd also took the first place under the Number of Issues and Programme Value of the Lead Manager Award Islamic 2009 while AmInvestment Bank Bhd got the second place for both awards.
The ceremony was graced by Nor Mohamed and RAM Holdings executive deputy chairman/group chief executive officer Tan Sri C. Rajandram.
Nor Mohamed said the Malaysian corporate bond market was only valued at about RM6bil in 20 years ago but it was not uncommon to have such an amount of debt securities issued in just one month today.
“In fact, despite the recent global economic and financial recession, gross issuance of corporate bonds averaged RM4.9bil a month last year, compared to an average of RM4.1bil in 2008,” he said.
He said the strong domestic issuance last year had increased the size of the Malaysian sukuk and corporate debt markets to RM669bil in aggregate, as at end-2009, compared with RM585bil in 2008.
“We are now the third-largest bond market in Asia, equivalent to 99% of the country’s gross domestic product (GDP) as at end of last year. This compares to 79% of GDP in 2008 and a mere 5% in 1990,” he added.
fr:biz.thestar.com.my/news/story.asp?file=/2010/5/8/business/6218770&sec=business
First time in Malaysia, proposal to reinvest dividends into new shares
An alternative investment option for investors
ON March 25 this year, Malayan Banking Bhd proposed a dividend reinvestment plan, whereby shareholders have the option of reinvesting their dividends into new ordinary shares of Maybank instead of receiving cash dividend or a combination of the two.
Although this method is not new in the global arena, it is the first time in Malaysia.
More commonly referred to as DRIP, it has been offered in US decades ago by many companies including some of the top companies such as IBM, McDonald’s, P&G and Exxon.
The default position is that the shareholder will receive cash dividend if he/she does not fill up the form to make any option.
It is one way to make your brokers mad as you will be buying stocks without paying them commission; on top of that you may be given an additional discount of up to 10%.
This is very appealing to small investors as it offers investors an alternative to accumulating stocks a little at a time in that particular company with an investment strategy of dollar cost averaging, meaning you will be buying stocks as they move up and down over the long term, averaging out the cost of your purchase.
On the other hand, DRIPs offer the company access to capital.
The money, instead of going to another investor when a share is transacted, will go directly into the company for reinvestment purposes.
The share will be from new shares issued by the company.
As a whole, the market has remained neutral on the exercise.
The plan could have been designed to help Maybank conserve capital ahead of possible changes under Basel 3, which envisages higher capital adequacy ratios following the global financial crisis.
From Maybank’s perspective, there will be minimal earnings dilution based on past normal dividends paid by the company since the new shares issued annually would comprise around 3% of its share base as well as at a limited discount to the market price.
But perhaps more importantly for Maybank, the dividend reinvestment plan would result in a boost to its Tier 1 capital in two ways – firstly, a reduction in cash outflow from dividend payments, and secondly, an increase in new shares.
Some analysts suggest that if all Maybank shareholders opt for new shares in lieu of cash dividends this year, its Tier 1 capital could be boosted to 10.3% from 9.4% this year, and to 12.7% in 2011.
From minority shareholders’ perspective, if they were to opt for cash dividend, over the long term, their shareholdings would be diluted.
However, they could always use the cash dividend to diversify their investments into other shares.
The option to receive cash or reinvest really depends on the shareholders’ investment priorities; whether they require the cash immediately, such as pensioners who may depend on cash dividend from their stock investment for their retirement needs or whether they have the investment horizon to put their money a little at a time for capital appreciation later.
For those with the available time horizon, rather than fritter away the cash dividend received for unnecessary expenses, the reinvestment of dividends will boost wealth in the long run.
One caution – it has to be the right stock with good past records.
There could also be administrative hassles to keep track of the cost of one’s investments, and you don’t get to choose the timing.
While rights issues were undoubtedly the capital raising method of choice in Asia last year, they are not traditionally very popular, and quite rightly so, due to their dilutive nature.
We wonder: will rights issues fall down the pecking order with this plan on the table?
Other questions also arise if the dividend reinvestment plan becomes a reality – if a shareholder chooses to reinvest his or her entire electable portion in new Maybank shares, is the choice set in stone?
Or does a fresh election need to be made for each future occasion when the dividend reinvestment plan is applicable?
We hope it is the latter as it gives the investor the choice every time.
It was also stated that Maybank would transfer funds amounting to the total net payment of the dividend applicable under the proposed dividend reinvestment plan (after deduction of any applicable income tax) to an escrow account held in trust for the shareholders.
And for shareholders who opt for the reinvestment portion: is it taxable and need to be therefore declared and whether the tax voucher is given for the whole amount or only the portion to be distributed as cash dividend?
These issues are pertinent, since it was stated in the circular that there is no tax advantage to be gained in either option elected.
We hope that shareholders will attend the EGM to clarify issues.
In principle, the spirit of Maybank’s dividend reinvestment plan has its origins in the right place – adequate capital ratios.
# The writer is the chief executive officer of the Minority Shareholder Watchdog Group.
fr:biz.thestar.com.my/news/story.asp?file=/2010/5/14/business/6257213&sec=business
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