OK lets do some maths:

You need to put in RM 295.00/mth for 6 years.

Thereafter you get back RM 700.00/year + 5.5% on the dividend = RM 738.50/p.a for the next 30 years.

Part 1 of the calculation (The accumulation phase)
Mode = Begin, since your payment is paid at the beginning of the period
PMT = -(RM 295.00)
Period, N = 12mths x 6years = 72 periods
Present Value ,PVi = 0 meaning you start accumulation from zero
Interest rate, since you are not getting anything during this accumulation period, you are losing money because inflation is working against you. Therefore, I = (Growth - Inflation)/(1+inflation). I am using the conventional 5% inflation for calculation purpose. Therefore effective I = (0-5)/1.05 = -4.7619% p.a. or divided by twelve = 0.3968% per month.

Using these values I presented above I key in the figures into a financial calculator, your get a Future Value (FVi) = RM 18,433.48

Part 2 of the calculation (The distribution phase)
I will use Begin Mode as well, since I assume you will get your annuity due (payment) at the beginning of the period.
PMT = RM 700.00 + 5.5% = RM 738.50/p.a
Period, N = 30 years
Let the Present Value (PVii) equal to the above calculated FVi i.e. = RM 18,433.48
Let Future Value (FVii) = 0, since after 30 years you will get nothing back.
Now keying these new sets of figure into the financial calculator to calculate the Internal Rate Return or Return on Investment (ROI) for the whole 36 years tenure. (from start of the program until the end of distribution phase)

And....

...

...

IRR or ROI(I) = 1.32% p.a.(annualised)

Taa Daa.....

Are you happy with this ROI?

Even FD is consistently hovering above 2%

Xuzen



This post has been edited by xuzen: Dec 19 2009, 01:40 PM

Click here for my comment: http://forum.lowyat.net/topic/1231190

Or click here



Xuzen

Sigh.... Local financial literacy is still very shallow. Give money making opportunity to agents.

Xuzen

Wow, I posted the calculation in Dec 2009, that was like four years ago. I fail to educate people on the evil of saving plan.... I have failed miserably.

Hung head in great sorrow.

Xuzen

First study Financial Mathematics for one semester in any good finance course. The cheapest way to learn the fundamentals of financial mathematics is to attend Module 4 of The Certified Financial Planner course offered by FPAM.

Technically you can turn back anytime, it is up to you whether you can stomach the cut-loss or not.

I can, I did and now I have no regrets (Not HLCB, but an AIA similar plan). But it is just me. It may differ with you.

Xuzen

Come come, open mouth big big... here comes a big spoon to fed you:

Already mentioned to you "FPAM", just google it lah!

Xuzen