The Rule of 72 - taking charge of your own investment
Those in the know say that with the Rule of 72 you can estimate the future value of your investments with "uncanny" reliability.
Certified financial planner Paul Roelofse confirms that in a world of complicated financial calculations, it can indeed be a magic number for the layperson.
He says the Rule of 72 has two invaluable uses:
to estimate how much your money will be worth into the future
to understand how your purchasing power will diminish over time
For example, if I have an interest rate of 12% and I divide 12 into 72, the number is 6. What that represents is that it will 6 years for my money to double.Paul Roelofse, Certified financial planner
Roelofse says doing this calculation will focus your attention on how important the return on your investment is, instead of just thinking vaguely "oh, it looks like it's doing well".
So it's a question of taking charge of your investment yourself while taking into account your financial consultant's advice?
Sometimes I think we actually abdicate that real responsibility to our advisers.Paul Roelofse, Certified financial planner
For more advice from Roelofse and the role of the Reserve Bank as the custodian of inflation in South Africa, take a listen:
This article first appeared on 702 : The Rule of 72 - taking charge of your own investment
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