Rule of 72
Last week, we discussed about the power of compounding, which of course, more is better and if the frequency of the compound is higher, the more money for you to put in the pocket.
Today, I will introduce a tool for you to compound your growth: The rule of 72.
Apparently, Albert Einstein is the owner of this rule and what it says is that by taking 72 divided by the interest rate, that will be the number of years needed for your money to double. Amazing, isn't it?
The effect of compounding can actually be represented by a mathematical function called e, the exponential function. People are always interested to find out how long it takes to double their money, so this is a useful tool to use.
Again, for illustration purposes:
Suppose the bank pays you 0.5% interest every year. Take 72 divide by 0.5 and you will know that you won't get to see your money double in this lifetime.
Similarly, if there is an investment that promises 10% per year, you will get two times your money in approximately 7 years. But before you dump all your money into that unknown Ponzi scheme, please be assured that there is no investment that promise they won't lose any of your money. If you manage to find one, please leave a message cos I want to invest too.
Your writer is lousy in english. So he is trying to put things as simple as possible.
Last week, we discussed about the power of compounding, which of course, more is better and if the frequency of the compound is higher, the more money for you to put in the pocket.
Today, I will introduce a tool for you to compound your growth: The rule of 72.
Apparently, Albert Einstein is the owner of this rule and what it says is that by taking 72 divided by the interest rate, that will be the number of years needed for your money to double. Amazing, isn't it?
The effect of compounding can actually be represented by a mathematical function called e, the exponential function. People are always interested to find out how long it takes to double their money, so this is a useful tool to use.
Again, for illustration purposes:
Suppose the bank pays you 0.5% interest every year. Take 72 divide by 0.5 and you will know that you won't get to see your money double in this lifetime.
Similarly, if there is an investment that promises 10% per year, you will get two times your money in approximately 7 years. But before you dump all your money into that unknown Ponzi scheme, please be assured that there is no investment that promise they won't lose any of your money. If you manage to find one, please leave a message cos I want to invest too.
Your writer is lousy in english. So he is trying to put things as simple as possible.
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