The 72 rule
Using this very simple rule, we are able to estimate the amount of time required to "double" your investment savings. The formula is simply to divide 72 by the yield expected on your investments. As an example, if we expect an average return of 10%, we can then estimate that our investment will double every 7.2 years (72/10). Following this small table, we are able to use this rule for various yields:
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72 RULE FOR A $50 000 AMOUNT |
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Will generate an amount of : |
Expected return |
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|
12% |
10% |
8% |
6% |
4% |
2% |
|
|
$100 000 |
6 years |
7.2 years |
9 years |
12 years |
18 years |
36 years |
|
$200 000 |
12 years |
14.4 years |
18 years |
24 years |
36 years |
72 years |
|
$400 000 |
18 years |
21.6 years |
27 years |
36 years |
54 years |
108 years |
The above table shows the importance of maximizing the expected return on your investments. It is therefore paramount that, always in keeping with your investor’s profile, one works with professional investment managers who will generally produce higher returns over time, while stabilizing assets during turmoil. This can have a significant impact on your retirement.
