For us to achieve any short term or long term financial goals. Whether it be accumulate wealth for retirement, a new home, or college funding for a loved one. We have to start somewhere. 

Today we will look at the Rule of 72 and discuss this rule and how it applies to your wealth accumulation! 

This is a simple and useful way to determine how long it will take for an investment to double given a fixed rate of annual interest. Divide 72 by the annual rate of return. By doing this an investor will get the potential time frame that will be needed for their investment to double. 

Lets look at an example. 

An individual wants to invest $1,000 that they hope to see double at some point in time. The investor would like to see a 10% rate of return with their money. Take 72 divided by 10 and it will take 7.2 years for the initial investment of $1,000 to double to $2,000. To use another example if we average 7% it will take an investor 10.3 years for their money to double. We average 12% it will take 6 years for our money to double. 

Remember if we are looking for our money to grow in a shorter period of time we will be taking on more risk with our investments. Increasing our risk may provide a shorter time frame when the market is performing. However, when the market is declining the increased level of risk will lead to an accelerated decline in the value of your investment. 

Use the rule of 72 to help put the time frame of this marathon called investing in perspective. Set your goals with your money and invest it accordingly to have it reach its full potential! 

Thank you for stopping by and be sure to check back in for more educational videos. I hope you found this video helpful on your journey to financial freedom. I look forward to seeing you next time.