How Much does it take to Build a Sizeable Fund of RM 500,000?

RM 500,000?

Is it possible for me?

Indeed, RM 500,000 is a lot of money. If you are a salaried employee, chances are, you’ll earn lots more if you remain employed throughout your lifetime. In most cases, you’ll eventually build a sizeable fund of RM 500,000 and beyond. Thus, it is not a question of possibility. More importantly, the questions are:

– How soon will you get there?

– How much do you need to get there?

Question 1:

If I intend to have RM 500,000 in 10 years, how much do I need today if I’m placing money into a fixed deposit account earning 3% interest per annum?

The answer is RM 372,047.

Question 2:

What if I want it in 20 years instead of ten?

Then, the answer is RM 276,838.

Question 3:

Let us say, I still want my RM 500,000 in 10 years. Instead of 3%, what if I’m able to achieve return on investment (ROI) of 6% without taking much risk?

The answer is RM 279,197.

If you noticed, it is comparable with RM 276,838 calculated for Question 2. Thus, I believe, it is better to learn how to invest to achieve higher ROI than to settle for lower ROI as we can achieve our financial goals faster.

Now, let us make it more realistic. Before we move on, let us make several assumptions:

– Let us say, we stick to the timeframe of 10 years.

– We intend to remain employed during the 10-year period.


Instead of the amount you we need today, you would calculate the amount of capital needed on a monthly basis to achieve your financial goal. Thus,

Question 4:

If you have zero in your bank account, what is the monthly amount of Fixed Deposit needed to achieve RM 500,000 in 10 years?

The answer is RM 3,578 a month.

Question 5:

Of course, it’s unrealistic to expect one to have absolutely nothing in the bank account. Instead, let us say, you have RM 100,000. Thus, what is the monthly amount of Fixed Deposit needed to achieve RM 500,000 in 10 years?

The answer is RM 2,616 a month.

The above question assumes that you’re totally disinterested in investing and place all savings into Fixed Deposits. Personally, I believe, if you are reading this, you have a sincere desire to learn how to invest and achieve your financial goals as quickly as possible. So, the next question is:

Question 6:

If you have built an investment portfolio of RM 100,000 which has ROI of 6% a year, how much of monthly capital do you need to add-on to enlarge your portfolio to RM 500,000 in 10 years?

Then, the answer is RM 1,958 a month.

Question 7:

What if you find it a challenge to save close to RM 2,000 a month?

Then, it is better to increase ROI from your my investment. The higher the ROI, the lower you need to save on a monthly basis to achieve your goal. For instance,

Question 8:

How do you calculate the answers to the seven questions above?

The answer is to have a financial calculator. In this article, I’ve covered just a couple of applications for using a financial calculator. There are so much more to explore. For instance, you can estimate your returns on investment, the effective interest rate for your car loan, personal loan, credit card debt and mortgage.

Thus, we have invited KC Chong, founder of SAC Wealth Management Sdn Bhd and former CFP Module 6 Lecturer to conduct a 1-Hour session on how to best use a financial calculator:

Link:

KC Chong: Financial Calculator 101 – Time Value of Money