rule of 72

Call me suaku, but really, I've never heard of this 'Rule of 72' till recently. Here's how it works. Take the number 72 and divide it with an annual rate of return (say the interest given by the bank) and you get, roughly, the number of years it takes to double your initial investment. If the returns are negative value, then that's the time taken to halve your money.

For example, let's say we keep $10,000 inside the bank account. The interest rate is roughly 0.10%. So 72/0.10%, so roughly, in about 720 years time the money will double to $20,000. Not forgetting, the inflation rate is not costed in yet. One thing to note that if the rate of return is higher, then the accuracy of this rule may differ, and hence, there is another calculation called 'Future Value'.

If I want to double my money in say 5 years time, I would need to look at any investment instrument that can give an annual return rate of about 14% and above.

It's been about 11 years since I've started working, and by right, I should've accumulated quite a bit of money, right? Unfortunately, the answer is no. The problem with some people, is that we do not like to manage our own finances. Sounds funny? But it is a reality. Looking back, I'm still glad I started investing little by little via ILPs. It's really a lazy person's way because with just $100 a month, not only I get some insurance protection, it also put aside some bit into unit trusts. I subscribe to time cost averaging theory, and if have the money, then can do the value cost averaging as well.

But of course along the way, I was quite dumb to surrender my first policy (which should be worth about $10K or more if I had stayed invested) based on ill-advise from another agent (from rival company). Then, I happened to buy some unit trusts funds during the peak of the bull run in 2007, and watched the investment dwindled subsequently.

I am still learning, and of course, stocks and shares are very very intimidating at this moment. Hahaa, probably it is a learned response (though I cannot remember from where nor what!). I always had this fear that instead of buying 1 lot (1000 units), I may key in 1000 lots! Foolish, but yeah.. that's me.

So, if you're still planning on doing nothing... at the very least, start of a regular savings plan (say $100) into unit trust that pays dividends. For any working adults that has a monthly income of say $2.5K, $100 is just like what.. 4% of your income? Not even a pinch. And because it's giro'ed off the bank account, you won't even feel it. After 5 years, you would've saved $6K and received all the dividends. If there's a price difference, say you buy in at an average cost of $1.2 and after 5 years, say the price per unit is say $1.4, then that's profit as well.

Happy investing!