In this post, we are going to discuss how could you calculate your future investment worth.

FV = PV (1+i)n
where FV = future value of investment worth
PV = present value / initial capital
i = interest rate / rate of return
n = number of years of investment Example 1:

PV = capital of RM20,000

i = 9% ROR = 0.09

n = 15 years

Hence, FV = 20,000 (1+0.09)15 = RM 72, 849

Using this equation, you can easily estimate how much you could your future asset will worth if you start investing now. This equation can also be used to calculate out your initial capital, required ROR, or required duration too. For example, if you provide the value of FV, i and n, you could find out the PV needed now.

Quick exercise: To make you clearly understand with the concept of investing young, let’s go through another example. Assuming we want to have RM1 million (RM1,000,000) by age 60. How much capital do we need to invest starting at different age? (Take the ROR as 8%)

Case 1: Starting at age 25:

FV = PV (1+i)n

n = 60-25 = 35

1,000,000 = PV (1+ 0.08)35

PV = RM67,634

Case 2: Starting at age 35:

FV = PV (1+i)n

n = 60-35 = 25

1,000,000 = PV (1+ 0.08)25

PV = RM146,017

From the equation, it is clearly shown that there are three main factors that could affect your future investment worth. First, the larger the capital you have, the better. Secondly, the higher the rate of return the better, but it should be realistic. Lastly, the longer the time given for compounding effect to take place, the better.

Again, what I want to emphasize here is there a importance of start investing young. The younger you start, the easier for you to achieve financial independence. The later you start, the larger the capital you need to achieve your financial goal. To really understand how much difference you can make by investing early, check this out.