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Investing Rules: The Rule of 72


We all know that the main component for any investments to grow is time. This is the reason why you carefully study and choose the investment vehicle to put your money on.


Investing Rules - Rule of 72
"money-profit-finance-business" by nattanan23 is licensed under CC0


Time is money as the saying goes, depending on what age you started investing or the state of the economy, time may either work or go against you. To avoid this pitfall, we tend to look for a much lucrative investment that offers high rate of return. Sadly, this also causes some to enter an investment scam and lose their hard-earned money.


To guide your decision, you need to know and follow simple rule of investing.



The Rule of 72


This is used to determine how long it takes to double your money given a fixed interest rate.



How Does it Work?


Say you have Php10,000 and you just deposited it on a regular savings account. Let us say that it offers 1.25% interest per year.


Using the formula: Year = 72/interest rate


Year = 72/1.25


Year = 57.6



Numbers don't lie, your 10,000 pesos at 1.25%/year will take 57.6 YEARS to become 20,000. This is not taking into account the inflation rate, which can add more years to the current number.


A quick search gave me a figure of 70.95 as the average Filipino life expectancy. So waiting for more than 50 years is possible if you will start investing at the age of 13. But in reality, waiting that long is not that feasible.



How Can You Double Your Money in Less Number of Years?


The straight answer is to diversify your investments. Some investment vehicles are:


  • Bank products
  • Bonds
  • Mutual Funds
  • Stocks
  • Crypto Currencies


Every investment vehicle carries their own level of risk, so make sure that you know full well how an investment work.


If you have the savvy, a marketable idea and possibly a big capital, you can establish a business. This is a surefire way to actively earn and grow your wealth. If you like to do it passively, then Real Estate via rental properties is an established idea too. Read Starting a Real Estate Investment Trust: REIT Investing for Beginners for a primer to Real Estate investing via REIT.



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Time is what give things value. So don't waste it, invest it.




"The two most powerful warriors are patience and time.”
Leo Tolstoy



- Your Life In Perspective by Ælf ræd (Elf Counsel)

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