Hello all, my first post here. I?ve been reading for a while but now it?s time to raise my hand with a question.
What do you guys think about investing in 3 year CD?s at bank central and then reinvesting all the interest and principal every 3 years to kind of compound the interest long term?
My thinking is that if one starts with 1million pesos today (about US$29,000), and just keeps the money there and keeps reinvesting it at an average 13% interest rate, it would turn into almost 40million pesos in about 30 years.
Obviously in 30 years the peso/dollar exchange will be much different, I am thinking that since for the past 10 years the peso went up 20 dollars (from 1999 to 2009), perhaps it may go up another $60 pesos in 30 years. So the exchange would be close to 100/1. However, even then, a meager investment of US$29,000 turned into US$400,000. What if one added an additional US$10,000 every time the CD is reestablished to dollar-cost average the investment? Or what if the average interest rate turns out to be 14% as some years it may be 16% and others 15%, etc.
I know this raises a lot of questions and there?s a lot of risk, but even if the peso goes as high as 150/1 the investment would still grow to over US$250,000 in 30 years. And if one had an additional 10 years to invest the rewards would be even higher as the investment would double every 5.5 years at 13% interest.
I look forward to your comments on this.
Thanks,
What do you guys think about investing in 3 year CD?s at bank central and then reinvesting all the interest and principal every 3 years to kind of compound the interest long term?
My thinking is that if one starts with 1million pesos today (about US$29,000), and just keeps the money there and keeps reinvesting it at an average 13% interest rate, it would turn into almost 40million pesos in about 30 years.
Obviously in 30 years the peso/dollar exchange will be much different, I am thinking that since for the past 10 years the peso went up 20 dollars (from 1999 to 2009), perhaps it may go up another $60 pesos in 30 years. So the exchange would be close to 100/1. However, even then, a meager investment of US$29,000 turned into US$400,000. What if one added an additional US$10,000 every time the CD is reestablished to dollar-cost average the investment? Or what if the average interest rate turns out to be 14% as some years it may be 16% and others 15%, etc.
I know this raises a lot of questions and there?s a lot of risk, but even if the peso goes as high as 150/1 the investment would still grow to over US$250,000 in 30 years. And if one had an additional 10 years to invest the rewards would be even higher as the investment would double every 5.5 years at 13% interest.
I look forward to your comments on this.
Thanks,