The Rule of 72


If you don’t know about the Rule of 72, you should. It’s a very easy way to make sense of “rate of return” and how important it is.


For example, if your investments make 1% a year, then the rule says that it will take 72 years for your money to double. So if you invest $100,000 and you earn 1% a year (which is roughly the rate being paid in a savings account or a GIC these days), then it’ll take you 72 years before your $100,000 turns into $200,000. That is a really, really, really long time!


On the other hand, if you make 7.2% a year (so says the rule of 72), it only takes 10 years for your money to double. It only takes 10 years for your $100,000 to turn into $200,000.


Your rate of return really, really matters. It has serious implications for the rest of your life.


Of course, you don’t have to aim for 7.2%. This is just a mathematical concept. You can aim for more or you can aim for less depending on a lot of different factors. The key thing to remember is that your rate of return matters.



Disclaimer:

This article is for educational purposes only and is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Opinions expressed are those of the owners and writers only. Every effort has been made to compile this material from reliable sources, however, no warranty can be made as to its accuracy or completeness. It may also include forward looking statements concerning anticipated results, circumstances, and expectations regarding future events. Forward-looking statements require assumptions to be made and are, therefore, subject to inherent risks and uncertainties. There is significant risk that predictions and other forward looking statements will not prove to be accurate. Please consult an appropriate professional regarding your particular circumstances. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or the fund facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual Funds and Segregated Funds provided by the Fund Companies are offered through Worldsource Financial Management Inc., sponsoring mutual fund dealer. Other Products and Services are offered through Rhys Martell/Well-Built Plans Financial.


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Mutual Funds and some Segregated Funds provided by the Fund Companies are offered through Worldsource Financial Management Inc. Other Products and Services are offered through Rhys Martell/Well-Built Plans Financial. 

 

Rhys Martell is an independent Financial Advisor in Abbotsford, BC. He is a member of the Estate Planning Council of Abbotsford, a Chartered Investment Manager, a Qualified Associate Financial Planner, holds an Elder Planning Counselor designation, and a Bachelor of Arts in Applied Communications from Royal Roads University. Servicing clients from Abbotsford, Mission, Chilliwack, Langley, Surrey, Vancouver, the Fraser Valley and beyond.

Valley Wide Financial
Worldsource Financial Management