The Rule of 72 😃📈Time for a educational post from me.
At some point as traders we have all had the thought of how long will it take to double my account.
The rule of 72 is the easiest way to work that one out.
The rule of 72 is a handy mathematical rule that helps in estimating approximately how many
years it will take for an investment to double in value at a specified rate of return.
Rule of 72: If 72 is divided by an interest rate, the result is the approximate number of years
needed to double the investment. For example, at a 1% rate of return, an investment will
double in approximately 72 years; at a 10% rate of return it will take 7.2 years.
But the example above is based on a 10% return per year.
We as traders have the chance if our strategy is consistent and profitable to return good percentages on capital in a matter of weeks.
Time for more examples.
Some traders can return 6% a month
So 72/6 = 12 months to double the invested capital in your account.
Lets say a trader returns 4% month on month
72/4 = 18 months to double your investment.
The rule of 72 servers two purposes to us as traders.
1. I personally feel it helps to keep us grounded as traders.
To many enter this game thinking they will flip 1000 into 10000 in a matter of weeks
A 4% return per month is a good return and from the equation above it would take 18 months to turn 1000 into 2000!
So I would like to think the rule of 72 acts as reminder of the challenges we face when it comes to expectations.
2. Having said the above the rule of 72 also serves as a reminder that as traders who do or potentially can go on and
achieve consistent profits especially monthly we can make way more returns than what a instructional bank or establishment would
offer to you as an investor. The rule of 72 then becomes an inspiration to take control of your own money game and aim for growth
that no one else can offer you.
Thanks for taking time to look at my idea.
Darren 👍
