Monday, November 3, 2008

CHGS compared to FD & Property

CHGS investment is meant for risk adverse investors who wish to have regular yearly income with higher interest than FD/Amanah saham, while at the same time grow their initial capital every year to hedge against inflation with capital protection. It is similar to property investment except that the rental income is guaranteed every year & you don't have to look for tenant or pay land tax, mantenence, agent fees etc.

Comparison for RM320k investment over 23 years

1) CHGS investment
(8%)year 1 to year 3 - RM25,600pa / RM2,133pm
year 4 onwards - RM38,400pa / RM3,200pm (at conservative 12% average)
Capital growth At maturity -
1) RM1,1-1.5 million +/- 400% (from sale of land),
2) RM1.9-2.3 million +/- 600-800%(including dividens)

2) FD at 3.75%
year1-23 - RM12,000pa / RM1000pm
Capital At maturity -
1)RM320k (original investment) ie. 0% capital growth
2) RM596k ie. 186% including dividens

3) Property (single story house in PJ)
Average rental - RM15,000pa (not guaranteed, depends on tenant availability) / RM1250pm (4.7%)
not including real estate agent fee, land tax, maintenance, legal fees etc)
Capital at maturity -1) RM1.1-1.5mil After 20+ years sale - +/- 400% return
not including real estate agent fee, legal fees, property gains tax etc
2) RM1.7-2.2 mil +/- 500-800% (incl dividens)

* all 3 comparisons does not take compounding into consideration. Returns will be higher for all 3 if compounding is used ie. money is re-invested.

How can I use my CHGS income?

Since the returns are guaranteed payable every year, it can be used as an addition to regular retirement income, children's education, holiday income or even pay for your yearly commitments ie. insurance premium, car/house loans. When you use your dividens as part of your passive income, it does not eat into your actual capital while it keeps growing every year from land appreciation.So in terms of portfolio spread, CHGS will fall into the area of your FD/AmanahSaham/Insurance spread, while you may have another portion for other speculative investments (shares, currency, unit trust, real commodity trading).

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