With the Rule of 72, the arbitrary value of 72, divided by your Return on Investment (ROI), will tell you how many years it takes for your money to double.
The number 72 divided by 10(% per year) = 7.2 years.
For example, if your money earns 3% per year in a bank CD (very high by today’s standards), and you have $1,000 in that account, it’ll take you 24 years to double that money.
Even though that assumes that you just leave the money in there and never add any additional money, I’m sure you’d agree… that’s a really, really long time to wait.
And unless you’re starting out in your early 20s, you probably don’t have enough time to grow your money at those measly rates, not to mention, inflation will most likely eat away most if not all of your profits anyways.
Now, at 7% per year, your money will double in approximately 10 years (72 divided by 7(%) = 10.3 years) – we’re compounding, remember? So it will take 10.3 years to double.
Let’s do a few more…
If your money earns 10% per year, it’ll double in value every 7.2 years.
If your money earns 20% per year, it’ll double in value every 3.6 years.
If your money earns 55% per year, it’ll double in value every 1.3 years.
The Power of 6% Monthly
While the average CD holder would be thrilled to get 6% per YEAR in today’s economy, would you be “okay” with being able to consistently earn 6% or more on a monthly basis?
Why is a 6% per month return so important?
Why not 5% or 5 ½% per month?
Well, the answer lies in the power of compounding your profits and the Rule of 72, because if you can earn 6% per month on your money, then you can double your money every year!
Now I don’t know about you, but that’s something I can work with.
If you’re doubling your money every year, and let’s say you only have $1,000 to start with, 5 years later you can have $32,000, and in 10 years your account can grow to $1,024,000.00.
It’s possible to get these kinds of returns with Managed Forex and Futures Accounts where experienced traders trade your brokerage account for you on autopilot and take a percentage of the profits they make you. And it’s the reason why 6% is such an important monthly profit target to shoot for.