How to Double Your Money

How to Double Your Money
We will double your money in just a week! So if you want to be reaaaally riiiiich, sell your properties now and invest the proceeds in our business! 
But wait, there's more! (Whoever invented this immortal marketing line is genius!) If you open not just one, but two accounts, your money will earn a commission bonus!



You won't regret it! Hurry up because it's a limited offer!
Sounds catchy? Or itchy? Whatever the case may be, UTANG NA LOOB (kahit 'di tayo magkakilala), don't buy those lines! Don't entrust your money to someone who would tell you these terrible lies!  

Run!
Please don't be a victim with these crazy schemes and be part of another tabloid news about people who got broke by being scammed and then blaming the government for their loss and misfortune while it was their ignorance that gave them the costly mistake.

The title of this article is How to Double Your Money. I'm sorry to disappoint you, but this article is not exactly about what its title is suggesting. It's actually about Knowing How Long It Will Take for Your Money to Double. Please don't get upset if I tricked you. I'm just trying to prove a point. See? You were easily enticed by the title that's why you're here -- excited -- curious -- wishful -- that I'd actually offer you an option to double your money!

OK, enough of the homily.

So, how would you know how long it will take for your money to duplicate itself? Use the Rule of 72.

Rule of what?
The Rule of 72 is a simplified way to determine how long (in years) an investment will take to double, based on a fixed interest rate per year.

How does it work?
By dividing the number 72 with the annual rate of return, this will give the estimated number of years it will take for your money to double. Please take note that the Rule of 72 works in assumption that the interest earned is annually compounded (i.e. compounding interest).

Let's do the Math
Let's say you have a Time Deposit account in a bank that gives an annual rate of 4%. By following the computation of the rule, your money would double in 18 years, as illustrated in this computation:


72 / 4 = 18
Suppose you know nothing about investments and only save in a bank (via regular savings account) where the annual interest rate is 0.75%. This is how you're growing your money:

Money doubles after 96 years

By the way, did you know that you're losing money in the bank? But now that you're smarter enough NOT to wait that long for your money to grow, you may consider putting your money in a Time Deposit account, or find a Cooperative which can give you about 4% interest rate per year:

Money doubles after 18 years

You think waiting 18 long years for your money to double is acceptable? Good then. But here's the bad news: you're just saving...and saving alone will not suffice. You need to invest for your money to really grow! So now that you've learned that saving alone won't work, it's about time you learn other investment vehicles such as Mutual Funds or the stock market.

Money doubles after 6 years

The interest rate I used for the Mutual Funds / UITF / Stocks  is 12% (I'm being conservative, investing on stocks or Mutual Funds can give higher/lower returns). If we use the above figure to see the actual numbers and thus prove the Rule of 72, we will get:

How to double your money

As you will notice, the interest rate earned on each year is added to the initial investment of 100,000 Pesos. This is known as compounding interest. So on the sixth year (which is the estimated answer given by the Rule of 72), the initial investment doubled! Well, it's actually 2,618 Pesos short from being literally doubled, but that's because the Rule of 72 is simply an estimation.

Please take note that the annual rates used on the examples above should not be a basis of your investment. Interest rates on banks varies from one another (from 0.25% to 1.25%), including Time Deposits (from 3% to 4%). Also, investing in Mutual Funds, UITF and Stock Market have the highest potential of returns but carries the highest risk as well. Hence, the annual rate of return from these investments will vary based on the fund performance.

If you want to try using different interest rates, use this free Rule of 72 Calculator

If you want to start investing in Mutual Funds, or you still have questions about how it works, you can ask me here.

With all these examples, what was the rallying point? It was to show you that no matter how great or crazy an investment may sound to you, it will take years for your money to really grow -- and that there is no such thing as Double Your Money in a Week! It's what sets apart a legit and sound investment from a scam.

Oh, and one more thing.

Start early. Start while you're young, while time is in your side. But don't just save. Save and invest. Find a good investment option for you. Saving alone won't work. Because, in the words of actor and humorist Will Rogers, “the quickest way to double your money is to fold it in half and put it in your back pocket.”

PisoandBeyond
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5 comments:

  1. Nice way to take the "double your money" issue on the Rule of 72 concept. The Rule of 72 was written by many others but not as much as educating as you did because of the way you injected the floppy 2x your money rule. Keep it up!

    ReplyDelete
  2. You got me! haha. nice post very clever way to educate people!

    ReplyDelete
  3. good read and informative post!

    ReplyDelete
  4. I was getting myself ready to bombard your post with all the "you're a scammer and no risk is too good to be true, etc. comment" and when I read your post it hit me. Now I ended up sharing your article to my wall!

    ReplyDelete
  5. Very clever article indeed! Keep it up!

    ReplyDelete

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