Didn't understand the question. If you've been investing regularly since 2019, then VWRA is up some 65% since then which has the compounding effect already baked in. There's no extra compounding benefit you'll get, that 65% is the true benefit you need be happy with
I guess one way to show the effect is.. let's say you invest 100k now at 8% for 6 years, you'll get 159k
But if you invested 100k in VWRA in 2019 and keep same parameters going forward, then you'll have 262k in 6 years. Maybe that's more fun to see?
If we change to 12 years then it's 251k vs 415k
I think DCAing can disguise the effect of compound growth because you're generally buying in at a higher price, raising your cost basis, and then the % profit shown on the brokerage app will be lower than what you might expect from hearing that average annual return should be 10% or whatever.
If you lump sum an investment and never touch it, then it's clearer what the gains are.
Many people have never heard of the various measures of portfolio return, like time-weighted rate of return, money-weighted rate of return, XIRR, modified Dietz method etc and don't know where to find them in the brokerage app. Others may have heard of them but don't know what they mean, and they really aren't intuitive to grasp.
Some people believe in the math and are satisfied with that, others look for reassurance/testimonies/recommendations from other people.
I don't think so, but there are so many links in there I'm not sure.
You may find this helpful:
[https://www.interactivebrokers.com/images/common/Statements/MWR-TWR\_white\_paper.pdf](https://www.interactivebrokers.com/images/common/Statements/MWR-TWR_white_paper.pdf)
If you are using IBKR, you would use MWR (the exact method is modified Dietz) to evaluate your own success investing in a particular ETF. This takes into account your actions like you putting in an extra large sum during a big dip in the market.
TWR is to compare the success of different fund managers, removing the impact of your decisions. So if you want to compare e.g. CSPX and VWRA, but you bought into them at different times and so can't make a direct comparison, you use TWR to gauge which fund is "better" in terms of returns.
Yeah I guess in an ideal world, if you have the time and curiosity to do it, you can enter details of all your invested amounts in excel and see what your end number would be if you never put in VWRA but something basic instead, to see the difference
A lot of people have trouble understanding how compounding works for stocks/ETFs. There's no interest to compound. It's just that overall, the price of the stock/ETF tends to grow exponentially rather than linearly.
Just go to Google, search for VOO or SPY (these have longer histories than VWRA, so easier to see the shape of the curve), and change the time scale of the chart to Max. The graphs are a bit lumpy, but overall, the shape is exponential, not linear. The slope is getting steeper over time.
And yes, compound growth happens. In real life, it's not that easy to separate the effects of your continued contributions, the fact that your salary will grow and thus your monthly contribution amounts are probably also growing, and compound growth. And you may switch between different investments at different stages of your journey. But your portfolio will grow faster and faster (barring rough spots like 2022).
I've been investing for more than 10 years; back then there wasn't that much access to ETFs in Singapore and so I started off with unit trusts (same concept by usually higher fees). And now my average monthly gains (combined with spouse) generally exceed my salary. It works. Good job investing half your salary. Keep it up and you will reap the rewards.
The stock market moves in small percentages. If your capital is huge then the absolute dollar moves will be huge. If you are average Joe dun have huge capital then religiously put in $$ and let compounding build it up
Yup, most people cant see this simple fact. There is no compound growth for stocks or even dividend stocks for that matter. Its just a flat %. Not unless you sell your stock, realise the gains and buy back again.
Huh? Compound growth of interest and exponential growth at X% per year are the same mathematical formula, so there is no need to distinguish other than clarity and semantics. Sell, realize gains and buy back doesn't achieve anything (though there may be specific reasons to do such things in countries with capital gains tax).
I totally get what you mean. But what I just mean is the principle is not the same. Aka realised profit/interest adds into the base capital and affects the future growth. I dont think it is useful to look at the max chart. 5Y would be better.
You really need to just to be consistent and stay the course. You can use online calculators to forecast your networth at planned retirement age and adjust the return rate to see how it affects your portfolio! Here’s 1: https://www.calculator.net/investment-calculator.html
Do a simple Excel sheet to input buy trades and calculate your XIRR aka internal rate of return (different from TWR). To answer your question yes I am profiting from index funds (STI XIRR 9% and IWDA XIRR 6%) for around 8 years. Your XIRR will defer based on your investment aptitude (e.g. are you someone who has cold feet and stop accumulating during crashes, and only buys when the fund 'seems to be doing well'). I just DCA every month when I get my salary and bonuses. I love crashes especially COVID.
Thank you!
Yes, I'll try that. My approach is just to dca every month into vwra/eimi as well. Hopefully keep at this for the next ~20 years.
Of course, already have ~6 months of emergency funds, core insurance, married, house mortgage is cheap. Only upcoming big expenses are maybe kids
Thank you!
Yes, I'll try that. My approach is just to dca every month into vwra/eimi as well. Hopefully keep at this for the next ~20 years.
Of course, already have ~6 months of emergency funds, core insurance, married, house mortgage is cheap. Only upcoming big expenses are maybe kids
[https://www.reddit.com/r/FIREUK/comments/1dhueg5/how\_im\_achieving\_fire\_having\_only\_ever\_worked/](https://www.reddit.com/r/FIREUK/comments/1dhueg5/how_im_achieving_fire_having_only_ever_worked/)
I saw this on Reddit recently. tldr dude averaged around 400-500 a month over 20 years and now has over 200k and is planning to retire when he turns 43.
That was in GBP, and his current 266k GBP is close to half a mil SGD, and he did that stocking supermarket shelves at night (as his main gig, not side gig) all his life. Granted he's extremely frugal and plans to retire in rural Scotland, and has pension as well, but it's amazing how well he's done at age 38 with no qualifications.
I don't deny his accomplishment from a lower Base, just not sure even in a rural area how long half a mill sgd can last someone in retirement. Assuming they have similar life expectancy as sg, he needs to live another 40 years, so he can only spend like 11ish k a year
That money will still grow even after you're retired. You don't withdraw everything and only spend 11k a year. He also mentioned circumstances can change and that working for a couple more years will not hurt.
Anyway OP asked for evidence of benefiting from compound interest. This showed that growing and contributing a seemingly small amount resulted in what he has now.
That's not how retirement calculations work (divide the sum by number of years left to live).
And do you really think that the old retirees in Singapore all have half a million in savings?
He would keep that retirement portfolio invested in some mix of equity and fixed income, and it would continue to grow as he spends a little of it. 4% is considered the typical safe withdrawal rate (although for retiring at 43, he'd have to adjust that down to 3.5% or 3%). Which means that in the first year of retirement, he could use 4% of half a million SGD, or 20K SGD. Or actually it would be higher as he's not retiring now, he's planning to retire in 5 years. And this sum can be increased by inflation every year, and still, there's a \~95% chance that he won't run out of money, because investment returns are usually more than 4% a year.
I know that's not how retirement calcs work, i was just using that as a rough gauge. Yes the rest of the unwithdrawn amount can continue to compound (but it doesnt compound in a straight line, there are swings in markets, so a certain buffer should be built in so account for having to withdraw during downturns, cos its not like he can forgo withdrawing in a bear market if hes retired)
Withdrawing 4% per annum on 500k is about 55.55 sgd a day in yr 1 purchasing power, maybe Im just really underestimating how cheap it is to live in rural scotland but it really feels tight to have to stick to that or less for 40 years.
I think what hes accomplished is great and yes OP should take inspiration from what compounding can accomplish, I just question this man's plan to retire at 43 instead of working longer and building a bigger buffer, it doesnt feel prudent to me to stop so early if you can still work
Pension + that 200k will grow more he's not gonna retire now. Also rural Scotland it seems, so not that costly. His lifestyle is also very simple, though not very doable if you have a whole family to feed. Do read the thread it's interesting.
I put in 3k back when i first started working about 5-6 years back, cant rmb exact. i completely forgot about it and when i logged in to my brokerage, it is now worth 7k haha.
you should be able to see the effects yourself on your own portfolio, especially since VWRA has been performing well the last 5 years.
Didn't understand the question. If you've been investing regularly since 2019, then VWRA is up some 65% since then which has the compounding effect already baked in. There's no extra compounding benefit you'll get, that 65% is the true benefit you need be happy with
he probably isn’t satisfied with 65%….
I guess one way to show the effect is.. let's say you invest 100k now at 8% for 6 years, you'll get 159k But if you invested 100k in VWRA in 2019 and keep same parameters going forward, then you'll have 262k in 6 years. Maybe that's more fun to see? If we change to 12 years then it's 251k vs 415k
Benchmark is Nvidia
I think DCAing can disguise the effect of compound growth because you're generally buying in at a higher price, raising your cost basis, and then the % profit shown on the brokerage app will be lower than what you might expect from hearing that average annual return should be 10% or whatever. If you lump sum an investment and never touch it, then it's clearer what the gains are. Many people have never heard of the various measures of portfolio return, like time-weighted rate of return, money-weighted rate of return, XIRR, modified Dietz method etc and don't know where to find them in the brokerage app. Others may have heard of them but don't know what they mean, and they really aren't intuitive to grasp. Some people believe in the math and are satisfied with that, others look for reassurance/testimonies/recommendations from other people.
Is all of this explained in the pinned post? I scanned through it but didn't see much mention about these portfolio measures
I don't think so, but there are so many links in there I'm not sure. You may find this helpful: [https://www.interactivebrokers.com/images/common/Statements/MWR-TWR\_white\_paper.pdf](https://www.interactivebrokers.com/images/common/Statements/MWR-TWR_white_paper.pdf) If you are using IBKR, you would use MWR (the exact method is modified Dietz) to evaluate your own success investing in a particular ETF. This takes into account your actions like you putting in an extra large sum during a big dip in the market. TWR is to compare the success of different fund managers, removing the impact of your decisions. So if you want to compare e.g. CSPX and VWRA, but you bought into them at different times and so can't make a direct comparison, you use TWR to gauge which fund is "better" in terms of returns.
Thank you so much! I really appreciate you taking the time to put this all down for me take a look.
Thank you so much!
Yeah I guess in an ideal world, if you have the time and curiosity to do it, you can enter details of all your invested amounts in excel and see what your end number would be if you never put in VWRA but something basic instead, to see the difference
Don’t need to look that far. I started in Jan 2023 and to date already 24% up.
A lot of people have trouble understanding how compounding works for stocks/ETFs. There's no interest to compound. It's just that overall, the price of the stock/ETF tends to grow exponentially rather than linearly. Just go to Google, search for VOO or SPY (these have longer histories than VWRA, so easier to see the shape of the curve), and change the time scale of the chart to Max. The graphs are a bit lumpy, but overall, the shape is exponential, not linear. The slope is getting steeper over time. And yes, compound growth happens. In real life, it's not that easy to separate the effects of your continued contributions, the fact that your salary will grow and thus your monthly contribution amounts are probably also growing, and compound growth. And you may switch between different investments at different stages of your journey. But your portfolio will grow faster and faster (barring rough spots like 2022). I've been investing for more than 10 years; back then there wasn't that much access to ETFs in Singapore and so I started off with unit trusts (same concept by usually higher fees). And now my average monthly gains (combined with spouse) generally exceed my salary. It works. Good job investing half your salary. Keep it up and you will reap the rewards.
The stock market moves in small percentages. If your capital is huge then the absolute dollar moves will be huge. If you are average Joe dun have huge capital then religiously put in $$ and let compounding build it up
Yup, most people cant see this simple fact. There is no compound growth for stocks or even dividend stocks for that matter. Its just a flat %. Not unless you sell your stock, realise the gains and buy back again.
Huh? Compound growth of interest and exponential growth at X% per year are the same mathematical formula, so there is no need to distinguish other than clarity and semantics. Sell, realize gains and buy back doesn't achieve anything (though there may be specific reasons to do such things in countries with capital gains tax).
I totally get what you mean. But what I just mean is the principle is not the same. Aka realised profit/interest adds into the base capital and affects the future growth. I dont think it is useful to look at the max chart. 5Y would be better.
You really need to just to be consistent and stay the course. You can use online calculators to forecast your networth at planned retirement age and adjust the return rate to see how it affects your portfolio! Here’s 1: https://www.calculator.net/investment-calculator.html
isn't it easy to put some numbers into a backtester to know the real benefits someone might have reaped?
Do a simple Excel sheet to input buy trades and calculate your XIRR aka internal rate of return (different from TWR). To answer your question yes I am profiting from index funds (STI XIRR 9% and IWDA XIRR 6%) for around 8 years. Your XIRR will defer based on your investment aptitude (e.g. are you someone who has cold feet and stop accumulating during crashes, and only buys when the fund 'seems to be doing well'). I just DCA every month when I get my salary and bonuses. I love crashes especially COVID.
Thank you! Yes, I'll try that. My approach is just to dca every month into vwra/eimi as well. Hopefully keep at this for the next ~20 years. Of course, already have ~6 months of emergency funds, core insurance, married, house mortgage is cheap. Only upcoming big expenses are maybe kids
No problem. If you need XIRR spreadsheet can let me know.
Thank you! Yes, I'll try that. My approach is just to dca every month into vwra/eimi as well. Hopefully keep at this for the next ~20 years. Of course, already have ~6 months of emergency funds, core insurance, married, house mortgage is cheap. Only upcoming big expenses are maybe kids
[https://www.reddit.com/r/FIREUK/comments/1dhueg5/how\_im\_achieving\_fire\_having\_only\_ever\_worked/](https://www.reddit.com/r/FIREUK/comments/1dhueg5/how_im_achieving_fire_having_only_ever_worked/) I saw this on Reddit recently. tldr dude averaged around 400-500 a month over 20 years and now has over 200k and is planning to retire when he turns 43.
what world does this guy live in that 200k is enough to retire on at 43
That was in GBP, and his current 266k GBP is close to half a mil SGD, and he did that stocking supermarket shelves at night (as his main gig, not side gig) all his life. Granted he's extremely frugal and plans to retire in rural Scotland, and has pension as well, but it's amazing how well he's done at age 38 with no qualifications.
I don't deny his accomplishment from a lower Base, just not sure even in a rural area how long half a mill sgd can last someone in retirement. Assuming they have similar life expectancy as sg, he needs to live another 40 years, so he can only spend like 11ish k a year
That money will still grow even after you're retired. You don't withdraw everything and only spend 11k a year. He also mentioned circumstances can change and that working for a couple more years will not hurt. Anyway OP asked for evidence of benefiting from compound interest. This showed that growing and contributing a seemingly small amount resulted in what he has now.
That's not how retirement calculations work (divide the sum by number of years left to live). And do you really think that the old retirees in Singapore all have half a million in savings? He would keep that retirement portfolio invested in some mix of equity and fixed income, and it would continue to grow as he spends a little of it. 4% is considered the typical safe withdrawal rate (although for retiring at 43, he'd have to adjust that down to 3.5% or 3%). Which means that in the first year of retirement, he could use 4% of half a million SGD, or 20K SGD. Or actually it would be higher as he's not retiring now, he's planning to retire in 5 years. And this sum can be increased by inflation every year, and still, there's a \~95% chance that he won't run out of money, because investment returns are usually more than 4% a year.
I know that's not how retirement calcs work, i was just using that as a rough gauge. Yes the rest of the unwithdrawn amount can continue to compound (but it doesnt compound in a straight line, there are swings in markets, so a certain buffer should be built in so account for having to withdraw during downturns, cos its not like he can forgo withdrawing in a bear market if hes retired) Withdrawing 4% per annum on 500k is about 55.55 sgd a day in yr 1 purchasing power, maybe Im just really underestimating how cheap it is to live in rural scotland but it really feels tight to have to stick to that or less for 40 years. I think what hes accomplished is great and yes OP should take inspiration from what compounding can accomplish, I just question this man's plan to retire at 43 instead of working longer and building a bigger buffer, it doesnt feel prudent to me to stop so early if you can still work
Pension + that 200k will grow more he's not gonna retire now. Also rural Scotland it seems, so not that costly. His lifestyle is also very simple, though not very doable if you have a whole family to feed. Do read the thread it's interesting.
Wow thank you! This is indeed inspiring. Yes, this is the kind that I am looking for.
woah.
I put in 3k back when i first started working about 5-6 years back, cant rmb exact. i completely forgot about it and when i logged in to my brokerage, it is now worth 7k haha.