Investing, a Life Skill: #2, Compounding - The Rule of 72
“Good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.” – Morgan Housel, “The Psychology of Money”
Investing matters. How you invest, matters more. If your objective is to grow wealth, risk is the price of admission and investors that are prepared to invest through volatility are more likely to achieve long-term results. Sit in cash earning a mere 1%, your money will double in 72 years. Take “market risk” and growth has the potential to come far sooner. A market return of 7% annually, doubles your investment in roughly 10 years.(1)
This is not a recommendation to buy a security, and is shown for illustrative purposes only. Past performance is no guarantee of future results. Source: FactSet.
(1) This statement is for illustrative purposes only, and is not a guarantee of results. The use of this statement is intended only for educational purposes to demonstrate the potential impact of returns over time.
