Double Your Money

Message/Experiment of the Week:

Did you know that there is a simple trick for figuring out how long it will take for your money to double in many of your investments? It is called the rule of 72. You simply take 72 and divide it by the annual interest rate or rate of return from your investment. So, let’s say you buy $10,000 of Magellan Midstream Partners stock today, which has an annual dividend of a little over 6%. If that dividend stays constant at 6% and you reinvest it into the stock each year, you can expect your $10,000 to double in the first 12 years (72/6) and become $20,000, then 12 years after that the $20,000 could become $40,000, then 12 years after that the $40,000 could become $80,000 and so on. All this from making one simple stock purchase and reinvesting the dividends over time. Plus, the stock could appreciate over time as well.

One quick caveat with this trick is that it works best with rates between 6% and 10%. If you get outside this range simply add or subtract 1 from 72 for every 3% the rate goes above or below 8%. So, if you have a rate of 11% you would divide 73 (72+1) by 11 to get roughly 7 years to double, and if you have a rate of 5% you would divide 71 (72-1) by 5 to get roughly 14 years to double. Also, speaking of financial tricks, did you know that you can quickly calculate an hourly employee’s annual income? Simply double their hourly pay and multiply it by 1,000. So, if they make $20/hour, double it to get $40/hour and then multiply it by 1,000 to get $40,000/year.

For an experiment this week play around with the rule of 72 and try to find an investment that will double your money quickly and that doesn’t have a lot of risk. Then make a small investment and write about it in your journal.

Quote of the Week:

“Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t pays it.” Attributed to Albert Einstein

Questions of the Week:

Why does my money double so fast?

Videos of the Week:

How The Rule of 72 Can Make Me Wealthy

The Money Expert: From $0 to Millions In 2 Years Without Any Hard Work!: Codie Sanchez | E258

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Disclaimer: This is meant to be inspirational, life-changing entertainment and insight, not professional financial advice. I am not a certified financial advisor.