Taking control - Time to learn about the Stock Market

Question 1: “Why should I invest?” The reality is that most of us have the same question, even if we don’t say it, “That’s too risky. I know people who have nothing right now. I’m not that dumb, I’ll just save in a savings account.”

So the first answer to calming yourself is to ask yourself: “Do I know what the Rule Of 72 is?”so” How will this affect me?”

What Is The Rule Of 72?
The Rule Of 72 goes back a long time. It (The Rule Of 72) was referenced by Luca Pacioli, an Italian mathematician, sometime during the 15th century as a convenient way to determine how long it takes your money to double, assuming you know the interest rate it earns. {Luca didn’t explain the rule much, meaning it most likely goes back even further than that, but the principle still holds true today}.

{Here’s an example: start with any amount of money, let’s say 0.00 to be simple. You invest it at 10%. Using the simplest of math, you take 72 and divide it by 10, and you get the number 7.2, which means your money will double to 0.00 in 7.2 years}.

{If you have 0.00 and you invest in at 7.2%, you take 72 and divide it by 7.2, and you get the number 10, which means your money will double to 0.00 in 10 years.
The same exact principle is true if you start with 0.00 or 0,000.00. That’s all the harder it is}.

Do we concur? So, this is not exactly precise. One benefit of The Rule Of 72 is that you can assume it will compound yearly In all actuality it could compound monthly or even daily. To get a good idea here you go, there are Financial calculators that are very accurate.

How will this affect me, anyway?
Let’s assume you really are thinking like our fictitious person at the beginning of this article, and you “know better” than to invest in the stock market, so you just leave some money every month into a savings account. Will you be happy knowing you save? You are possibly saying to yourself some people don’t save at all?

Let’s take a look at this for a second.
So you’re in a savings account which, in today’s market, probably pays you somewhere between 0.2% if you’re like most people and maybe 3%, if you’ve got a lot of assets and your mortgage there, too. If you are part of the second group and you are earning 3%, you would take 72 divided by 3, you would get….ouch, 24 years for your money to double.

If you are the former and this 0 is what you are earning.2%, well, you’re looking at having your money still double all right, and in only 3,600 years! Easy enough?

If the market is making you nervous because you are retired, only buying 3% CD’s is going to have your money doubling in 24 years providing inflation is zero. The inflation rate today is nowhere close to normal, the average rate of inflation in the US is 3% for the last 200 years. In all honesty 3% is no return at all, this is true in most cases.

How will you apply this knowledge to the stock market? It is the answer to the first question about why to be involved in it at all. Get involved, but don’t take more risk than necessary, and hire a professional to help, and you just might avoid falling behind the curve and working a lot longer than you’d like to support yourself and your family.