tag:blogger.com,1999:blog-8760307254603261893.post5500826280506007618..comments2023-07-30T21:23:49.509+08:00Comments on Because I say so...: The Investment AnalystCorneliushttp://www.blogger.com/profile/08049388322332876859noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-8760307254603261893.post-62491180993676659652014-01-13T17:13:43.050+08:002014-01-13T17:13:43.050+08:00I have since received a text message from a friend...I have since received a text message from a friend who's confused with all the figures given above (smile). Somehow it's all too complicated to understand!<br /><br />I want to say that those are figures I merely estimated from the top of my head, not using a calculator to count. But my intention is not to arrive at the exact amount in dollars and cents anyway. I wanted to demonstrate that it's not a loss-making venture.<br /><br />OK, let's be simple, never mind all those complications, and forget about the interests upon interests receivable and payable. Just bear in mind that the investor starts by depositing his own money RM5,000 for the investment. Then he pays RM731 per month for say 8 years. The earnings from the investment pay the rest of the loan. The total amount he paid from his own pocket for 8 yrs would therefore be RM5,000 + RM70,176 [RM731 x 96months] = RM75,176. But by then, he would have RM100,000.<br /><br />Think about it, is that not a gain of about RM25,000 over 8 years?Corneliushttps://www.blogger.com/profile/08049388322332876859noreply@blogger.comtag:blogger.com,1999:blog-8760307254603261893.post-30218983590578883702014-01-13T13:18:30.692+08:002014-01-13T13:18:30.692+08:00Oh! I think there is another way of seeing it!
St...Oh! I think there is another way of seeing it!<br /><br />Still using the same investment model, you deposit RM5,000 of your own money, and then pay RM731 every month for say 8yrs. So your total amount that you pay out of your own pocket for the 8yrs would be about RM75,000, but by then you have RM100,000. (Forget about the bank; don't confuse yourself by grudgingly harping on the fact that you have to pay interest for the loan!)<br /><br />Now you tell me if that is a gain or a loss.Corneliushttps://www.blogger.com/profile/08049388322332876859noreply@blogger.comtag:blogger.com,1999:blog-8760307254603261893.post-37344839858813148932014-01-13T13:12:54.536+08:002014-01-13T13:12:54.536+08:00Damn!...that's the trouble with butter fingers...Damn!...that's the trouble with butter fingers!... I meant to say RM120,000, but typed RM220,000 instead! Sorry if that's too confusing!...heheCorneliushttps://www.blogger.com/profile/08049388322332876859noreply@blogger.comtag:blogger.com,1999:blog-8760307254603261893.post-30396302234218716292014-01-13T13:08:25.864+08:002014-01-13T13:08:25.864+08:00Thank you, Anonymous friend, for your comment. But...Thank you, Anonymous friend, for your comment. But, no, the analyst's calculation is <b><i>wrong</i></b>. Back in my day in school, maths used to be a weakness of the <i>majority</i> of students. And I suspect that hasn't changed very much up to now. The analyst doesn't know elementary mathematics, that's why he gets all his figures wrong.<br /><br />Let me try to make it simpler to understand. <br /><br />According to the analyst, the investor paid about RM220,000, but only got RM100,000 after about 8yrs. If that were true, then of course it's a loss-making venture. But is it indeed true?<br /><br />That RM220,000 is made up of RM731 monthly payment, plus RM5,000 of the investor's own money (capital), plus the RM7,000 yearly dividends which he earns from the investment.<br /><br />The analyst says that the investor gets RM100,000 at the end of the 8yrs, but he has forgotten that apart from the RM100,000 net after 8 yrs, the investor has also been receiving RM7,000 (dividends) which he used immediately to help pay up his loan. So, actually the investor gets RM100,000 net after 8yrs <b><i>PLUS</i></b> RM7,000 yearly, thus resulting in a total earning of over RM150,000, and <b><i>not</i></b> RM100,000 as calculated by the analyst. So he pays the bank about RM120,000, but so what, he's still up by over RM30,000. <br /><br />For as long as the revenue is more than expenses, your net position is a <b><i>gain</i></b>.<br /><br />I hope the above explanation helps.Corneliushttps://www.blogger.com/profile/08049388322332876859noreply@blogger.comtag:blogger.com,1999:blog-8760307254603261893.post-60348406279702555642014-01-13T12:47:56.902+08:002014-01-13T12:47:56.902+08:00Haha!...renroc, great minds think alike!
I'm ...Haha!...renroc, great minds think alike!<br /><br />I'm sometimes encouraged anew when I realise that I still have some very loyal readers, even though I'm less active in updating my blog! Thanks, my friend!Corneliushttps://www.blogger.com/profile/08049388322332876859noreply@blogger.comtag:blogger.com,1999:blog-8760307254603261893.post-12228482022351120732014-01-13T11:03:06.378+08:002014-01-13T11:03:06.378+08:00The analyst's calculation seems correct to me....The analyst's calculation seems correct to me. For option A, investor has to pay RM731/month. So if 7.5yrs repayment (according to his example) = 90mnths, repayment for the bank loan = RM731 x 90 = RM65,790.<br /><br />But he also uses up RM7,000 dividends yearly to help pay the loan. Meaning RM7,000 x 7.5yrs = RM52,500.<br /><br />When both those amounts added together, the total will be RM65,790 + RM52,500 = RM118,290 over 7.5yrs. But at that point he has only RM100,000 net in his investment. He gets LESS than what he paid. So it is a loss, right?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8760307254603261893.post-23864841243463202772014-01-13T09:53:36.551+08:002014-01-13T09:53:36.551+08:00While reading the analyst's conclusions(before...While reading the analyst's conclusions(before reading any of your comments and without attempting any calculations), I arrived at exactly the same conclusions as you did ! <br /> renrochttps://www.blogger.com/profile/08702961078069307044noreply@blogger.com