The TFSA is as good as it gets in terms of TAX FREE savings. $5,000 a year may not seem like much but, driving what might seem to be a small investment with the power of compound interest, you’ve got an investment winner impossible to beat.
I offer the following TFSA investment scenarios. The scenarios range from the person who can contribute the maximum allowable $5,000 per year to the person who contributes $50 every 2-week paycheque 26 times per year.
Examples of TFSA investments based on a return of 5 % per year.
1) You invest $5,000 ONCE ONLY, and make no further TFSA contributions at all. If you are 18 when you make your first TFSA investment and you let your investment compound for 40 years (until you are 58) your $5,000 will have grown to $36,490. Based on contributions totaling $5,000 this $36,490 represents a TAX FREE profit of $31,490. Averaged over 40 years your TAX FREE return is a superb 15.75% per year. Where can you get that in the stock and mutual fund market? NET - NO TAX!
2) You invest the full allowable TFSA contribution of $5,000 ONCE A YEAR every year (hopefully the 1st of January so you get your investment compounding as soon as possible each year). If you are 18 when you make your first TFSA installment and you let your investment compound for 40 years (until you are 58) your $5,000 per year will have grown to $654,206. Based on contributions totaling $200,000 this represents a profit of $454,606 or an average of $11,365 TAX FREE profit per year. Averaged over 40 years your TAX FREE return ($11,365/$5,000) is a whopping 227% per year. NET - NO TAX!
3) You contribute $50 per 2-week paycheque to your TFSA from age 18 to age 58 (40 years). Over that time you will have contributed $52,000 and your $50-per-paycheque investment will have grown to $164,612 for a profit of $112,612. This is an average yearly TAX FREE profit of $2,815 which amounts to an average yearly TAX FREE return of 216% per year. NET – NO TAX! Such is the power of compound interest!
4) You contribute $100 per month to your TFSA from age 18 to age 58 (40 years). Over that time your TFSA investment grows to $151,781. Having invested a total of $48,000 this represents a TAX FREE profit of $103,781 which is an average yearly TAX FREE profit of $2,595. An average profit of $2,595 a year applied against a contribution of $1,200 a year amounts to a spectacular average yearly TAX FREE return of 216% per year. Not a bad return for an investment of $100 a month. NET - NO TAX!
5) You want to max out your TFSA investment opportunity of $5,000 per calendar year, but want to do this through regular periodic installments, so you contribute $192 every 2-week paycheque to your TFSA. You do this for 40 years, from age 18 to age 58. At the end of that time you will have contributed a total of $199,680 to your TFSA and accumulated a TAX FREE amount of $632,112. Having invested a total of $199,680 to accumulate $632,112 your profit is $432,432. Over 40 years this amounts to an average yearly TAX FREE profit of $10,810. If you apply your average yearly profit of $10,810 against your yearly contributions of $4,992 you’ve earned a whopping average TAX FREE return of 216% per year. NET - NO TAX!
Would someone please tell me where you can earn that kind of profit on a simple safe stress-free modest affordable investment, without undue risk and maintenance?
Go to Fisgard’s TFSA calculator at http://www.fisgard.com/ and plug in your numbers – your TFSA investment scenario – and see how you can accumulate a TAX FREE investment based on what you can afford or what you want to invest. Using the magical power of compound interest you will be pleasantly surprised at how large a small investment – or a series of small investments – will grow to.
COMPOUND INTEREST – THE 8TH WONDER OF THE WORLD!
Thursday, January 28, 2010
Tuesday, January 26, 2010
COMPOUND INTEREST - The 8th Wonder of the World......Albert Einstein
The investor's best friend is compound interest. I never cease to be amazed by the power of compounding on an investment; watching pocket change become millions. There is nothing as powerful as a compound interest investment. It simply GROWS, and as interest continues to be added to interest, inexorably compounding on itself, investment growth is staggering. The compound interest investment is simple, low maintenance, less stressful, and often more economical (no broker fees, etc).
Compounding means that you can earn interest not only on your principal, but also the interest you have accumulated. Interest on interest!
Starting your investment program as early as possible makes a huge difference on how much wealth you accumulate; the benefit of starting to save early in life is greatly magnified by the phenomena of compound interest. With compound interest the growth of your investment is calculated not only on the amount of original and periodic investments, but also on the interest or dividends that have accumulated on the same investment. Interest on Interest!
Simply put, compound interest forces your investment to grow much faster . . . exponentially faster!
It’s simple. Put as much money as you can into a compound interest investment as early as possible, and contribute as often as possible, never removing your principal or interest until you have reached your investment objective. The compound interest investment – the ‘patient’ investment, the ‘quiet’ investment – will always come through for you; but you must give it time – you must give it a chance to grow. The compound interest investment is a simple low maintenance investment that has the additional important advantage of being stress-free, therefore being a healthier investment. And – very importantly – its growth is predictable, so you can confidently and securely plan your future.
Just put a little money aside – regularly – and let it compound!
‘THE RULE OF 72’ – A SIMPLE WAY TO CALCULATE COMPOUND INTEREST
To calculate compound interest use the ‘Rule of 72’. The Rule of 72 is simple: to find the number of years required to double your money at a given interest rate just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at 6% just divide 72 by 6. At 6% interest it will take you 12 years to double your money.
Now run it backwards. If you want to double your money in 12 years just divide 72 by 12 to find that you will have to earn 6% on your money to double it in 12 years. At 6% you will double your money in 12 years.
Keep your investments as simple and trouble-free as possible. Invest your cash or Registered Plan funds (RRSP, TFSA, RRIF, RESP, etc) in compound interest accounts. Why suffer sleepless nights by gambling your hard-earned cash and Registered Savings and Registered Pension Plan funds in stressful high-maintenance costly stocks and mutual funds in which you stand a better chance of losing than winning? Invest, don’t speculate. Simply place your money in a steady growth compound interest investment; then enjoy yourself and let your money grow while you go about living.
OWN YOUR INVESTMENTS INSTEAD OF THEM OWNING YOU!
COMPOUND INTEREST – THE BEST FOR SUCCESSFUL INVESTING!
Compounding means that you can earn interest not only on your principal, but also the interest you have accumulated. Interest on interest!
Starting your investment program as early as possible makes a huge difference on how much wealth you accumulate; the benefit of starting to save early in life is greatly magnified by the phenomena of compound interest. With compound interest the growth of your investment is calculated not only on the amount of original and periodic investments, but also on the interest or dividends that have accumulated on the same investment. Interest on Interest!
Simply put, compound interest forces your investment to grow much faster . . . exponentially faster!
It’s simple. Put as much money as you can into a compound interest investment as early as possible, and contribute as often as possible, never removing your principal or interest until you have reached your investment objective. The compound interest investment – the ‘patient’ investment, the ‘quiet’ investment – will always come through for you; but you must give it time – you must give it a chance to grow. The compound interest investment is a simple low maintenance investment that has the additional important advantage of being stress-free, therefore being a healthier investment. And – very importantly – its growth is predictable, so you can confidently and securely plan your future.
Just put a little money aside – regularly – and let it compound!
‘THE RULE OF 72’ – A SIMPLE WAY TO CALCULATE COMPOUND INTEREST
To calculate compound interest use the ‘Rule of 72’. The Rule of 72 is simple: to find the number of years required to double your money at a given interest rate just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at 6% just divide 72 by 6. At 6% interest it will take you 12 years to double your money.
Now run it backwards. If you want to double your money in 12 years just divide 72 by 12 to find that you will have to earn 6% on your money to double it in 12 years. At 6% you will double your money in 12 years.
Keep your investments as simple and trouble-free as possible. Invest your cash or Registered Plan funds (RRSP, TFSA, RRIF, RESP, etc) in compound interest accounts. Why suffer sleepless nights by gambling your hard-earned cash and Registered Savings and Registered Pension Plan funds in stressful high-maintenance costly stocks and mutual funds in which you stand a better chance of losing than winning? Invest, don’t speculate. Simply place your money in a steady growth compound interest investment; then enjoy yourself and let your money grow while you go about living.
OWN YOUR INVESTMENTS INSTEAD OF THEM OWNING YOU!
COMPOUND INTEREST – THE BEST FOR SUCCESSFUL INVESTING!
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