A quiet day so here is one of my favorite postings from this year.
Einstein and his Rule of 72
This is a rewording of a earlier posting on July 21st 2005. OK, so maybe I will concede that Einstein may have stated that this was important, but I am still not convinced he “invented” it, but be that as it may.
If you click on the graph on the right you will find a gif that will show you a graph to show you the rule of 72 at work. Assuming your saving a set amount of money with only 1 compounding period per year, this graph is fairly accurate.
The other thing to remember is this is a DOUBLING period, and the more of those the better. Why? Remember if you find an investment that grows say by 10% a year (over year), your money doubles in 7 years (about), so in 21 years (about) your money will be 8 times what it is today! (remember 2 * 2 * 2 == 8). This is why it is so crucial to find good growth in your investments.
HOWEVER, risk is another thing to take into consideration too, and we’ll talk about that soon as well.
How many years until you retire? How many doublings are you going to need to reach your retirement money goals? You may need to figure that one out very soon.