How Compound Interest Works

Making Money with Compound Interest

First Published: June 17, 2010 ADawnJournal.com

Compound Interest 101

When most people think about compound interest, they think about credit cards and how they lose money with compound interest. Most people hate compound interest, and they want nothing to do with it but what about if we told you that you can make money with compound interest? What about if we told you that there is the possibility to make money with something that you only think about as a bad thing?

Well, you can if you know how to use compound interest properly.

The first thing you need to do to make money with compounding interest is to start saving at a very early stage. Many experts will tell you that it is not how much money you begin to save with, but how early you begin to save. If you start saving at the age of 20, $2,000 a year, you will save $20,000 by the time you hit 30. That is much better than throwing down $20,000 at 30 and it is easier to handle on your pocket book as well. You also make more money on the money you save earlier. That $20,000 from the age of 20 to 30 will grow because of compound interest, while that $20,000 at 30 will not. The best way to look at this is with an RRSP. So let’s do some examples to show how compounding interest can work.

If someone is the age of 20 and they put in $5,000 into their RRSP, by the time the person is 65 that amount of money will have grown to $160,000 if it grows at eight percent per year. That may seem like a lot of money but it is not when you are trying to retire. Compounding interest works here because each year, the interest is put on top of the total amount in the account. Here is how:

• Age 20: $5,000 x .8 percent $5,400

• Age 21: $5,400 x .8 percent $5,832

As you can see, the interest has gone on top of the previous amount made from interest in the past year.

How do you make the compounding interest work for you then? By putting away money every single year, without fail. So, if a 20 year old puts away $5,000 every year, then by the time they retire they will have saved a staggering $1,932,528.09. That is enough to retire on! Here is how it happens:

• Age 20: $5,000 x .8 percent $5,400

• Age 21: $10,400 x .8 percent $11,232

• Age 22: $16,232 x .8 percent $17,530.56

That is how easy it is to build your investment over time using compound interest when you put money into your RRSP each year. When you do invest this way using compound interest, you need to remember three things:

• Begin the process early because the more you contribute early, the more money you can make on compound interest.

• Keep your investments regular and do not allow gaps in when you invest each year.

• Give it time to build. Do not be impatient because it is a slow process that can keep making you money if you give it the time.

Economics 101 - India

The Economy of India 101

First Published: June 19, 2010 ADawnJournal.com

India is a growing giant, just like China to the north and that has many investors looking at India as a possibility for investment. However, many do not know much about India, nor it’s economy. To help, here are some things that you should know about the economy of India, a growing giant of Southeast Asia.

First of all, the economy of India is the 11th largest in the world and moving up fast. In addition, it has the fourth-largest economy based on the purchasing power parity. The economy of India has gone through many changes, and it grew slowly until the 1990s when the economy shifted based on reforms. As a result, with vast human resources and a massive amount of resources, most economists feel that by 2020, India will have one of the most powerful economies on the entire planet.

From independence in 1947, to 1991, the economy of India was one of protectionism, public ownership, extensive regulation, massive amounts of corruption and very slow growth. However, the liberalization of the economy in 1991 has changed things dramatically. Now, the economy is more of a market-based economy, which has caused many economic booms for the country since then. India now has one of the fastest growing economies on the planet, putting it on par for growth with its northern neighbour; China. While the 2009 Economic Crisis did cause a slow down, it only slowed the economy down to a growth rate of 6.1 percent, which is still excellent.

India’s economy is based largely on the service industry, which accounts for 62.5 percent of the country’s GDP, while agriculture and industry make up 17.5 percent and 20 percent. The labour force of the country is truly massive, pushing 500,000,000 people, which is more than nearly all the countries of the world have themselves, minus China, which has a larger population.

While India does have a growing economy, that puts it 11th in the world, the per capita income of the country is only $1,030, which puts it 139th on Earth. In addition, it’s per capita of $2,940 ranks 128th in the world. As of 2007, the country accounts for 1.5 percent of the entire trade of the world. In 2006, the last year for figures, the merchandise trade, which includes both exports and imports, was $294 billion. The service trade exports and imports are valued at $143, which puts the total import and export amounts of the country at $437 billion, which is 72 percent higher than the $253 billion the country had only two years previously. Trade continues to grow as an income source for the country, from six percent in 1985 to 24 percent in 2006.

India is a country on the grow, and that has many investors looking to it as a place to invest in the future, as the country makes more and more in the coming years. While there are still some problems to work out, the country is clearly on the right track.

How To Invest In China Through ETFs

Investing In China through ETFs

First Published: June 20, 2010 ADawnJournal.com

ETFs, or exchange-traded funds, are considered to be some of the safest forms of investment in the world today. If you are thinking of investing, and don’t mind less reward for less risk, then an ETF is what you should be looking at. Currently, China is a growing giant that will probably overtake the United States midway through the 21st century as the world’s largest economy and that has a lot of investors thinking about getting in on the action. However, China is still a difficult investment because of the chaotic market in the country; so many investors decide to invest in China through ETFs. If this is something that would interest you, then here is how you go about it:

1.   Look at various Chinese ETFs available based on their industry weights, how many holdings are in each ETF, and the expense ratios of the ETFs. Some that you can look at include iShares FTSE/Xinhua China Index, which is based off an index that has 25 companies in it. There is also the SDPR S&P China ETF and this one has more companies than the iShares ETF.

2.   You should consider not only investing in ETFs that are focused in China, but throughout much of Asia, which is currently booming while the rest of the world is suffering through a recession. One example ETF that you can look at is Vanguard’s Pacific ETF. Another one to consider is iShares MSCI Taiwan Index Fund. An index fund is a form of the ETF which is often considered the safest type of stock investment in the world. Another ETF to consider is the iShares MSCI Hong Kong Index Fund.

3.   In Canada, financial institutions like BMO, BlackRock, Claymore offer China and emerging market ETFs. Some of the examples are BMO China Equity, iShares China Index Fund, Claymore Brick ETF etc. A good resourceful ETF site is TMX Money. 

4.   After you have done the research for your ETFs, all you need to do is talk to your investment broker about what you want to invest in, and they will take care of it for you. However, this will cost you commissions and fees so if you want to keep from losing that money, you can invest yourself. The best way to do this is to get the ticker symbols of the ETFs that you want to buy into, go into your investment account and purchase these stocks as you would any other stock.

China is a booming country that is going places in the world. It will soon be the largest economy in the world, and with the world’s largest population it is also a force on the production and manufacturing platforms. That all being said, many feel that China is still a risky investment, and you should decide to invest in China based on your own risk tolerance and unique investment objectives. However, ETFs may provide a better alternative than directly buying stocks and also, it’s  a lot easier to get in on the action as China continues to take the world by storm and generate capital for the investors who can tolerate risk and put money into this growing giant from the Far East.

With some risks, ETFs can be still better but profitable, and may be the best option when investing in China.

Australia Travel Blog: Part 13 - Featherdale Wildlife Park

Sydney Travel Blog: Part 13 – World's Largest Native Collection

2-Day Combo: Sydney City Tour + Sydney Harbour Lunch Cruise and Blue Mountains Day Trip

Australia Travel Blog: Part 12 – Echo Point Lookout

The trip from Echo Point Lookout to Featherdale Wildlife Park travel would take about one and a half hours. After watching spectacular Australian roadside scenes for more than an hour, I arrived at Featherdale Wildlife Park located in Doonside, west of the Sydney CBD or downtown.

Featherdale Wildlife Park specializes in more than 1,700 Australian native birds and mammals from more than 250 different species in a lush bushland environment and it has the world’s largest collection.

My time at Featherdale Wildlife Park was limited. I rushed through all the various sections of the park, but the sections I spent more time in included: the Koala Sanctuary, walk-in enclosures with Kangaroos, Wallabies and Padymelons, and with other Australian favourites such as Wombats, Tasmanian Devils, Echidnas, Emus, Penguins, Crocodiles and Dingos.

The experience was really amazing with these uniquely Australian creatures. Although Featherdale Wildlife Park was not too big of an area, this diverse range of creatures looked happy and healthy. It was obvious that they were well cared for, which you will not find in many other zoos.

I saw some of the Koalas sleeping on the trees. They hold on in such a way that looked like they were going to slip and fall anytime, yet they didn’t fall and looked very comfortable.

The snake section looked rich, with many varieties of snakes. Most of them were Australian natives. Some of the exotic birds or animals with unusual names were: Laughing Kookaburra, Tasmanian Devils, Rainbow Lorikeet, Eastern Water Dragon, and so many more.

Featherdale Wildlife Park was my last stop on the itinerary in Australia. I will be heading to Malaysia next. 

Australia Travel Blog: Part 12 – Echo Point Lookout

Australia Travel Blog: The Blue Mountains & the Three Sisters

Sydney Travel Blog: Part 12 – Echo Point Lookout

2-Day Combo: Sydney City Tour + Sydney Harbour Lunch Cruise and Blue Mountains Day Trip

Sydney Travel Blog: Part 11 – Blue Mountains’ Stunning Natural Beauty

It took only a few minutes for the tour bus to drop us off at Echo Point Lookout. This is a nice facility with lots of restaurants, cafes, and gift shops.

Echo Point Lookout gives you the opportunity the see the Three Sisters from a very close distance. Echo Point Lookout, on the edge of its plateau, also provides great views of the Ruined Castle, Mount Solitary, and a greater panoramic view of the Jamison Valley.

There are many other experiences Echo Point Lookout leads to. The Three Sisters walk, Prince Henry Cliff walk, the Giant Stairway leading to the tracks below the cliff, and many scenic lookouts. The Giant Stairway has 1000 challenging stairs that take you to the valley floor below.

I took lots of pictures and video clips from different sections of Echo Point Lookout. The spot on the edge of the cliff that offers the clearest and closest view of the Three Sisters was crowded by tourists taking photos, so I had to wait to reach the edge. Once I looked at those pictures later on, I was telling myself that the wait was worth it.

I didn’t take the stairs or any other trails due to my limited time. I had a few minutes left over and I decided to browse the giftshop. I bought some tiny gift items at the shop. 

After we were done at Echo Point Lookout, we headed back to Sydney. The last stop on the itinerary was Featherdale Wildlife Park in Sydney.