A Plan to Double Your Wealth With the Rule of 72

Personal Note: In this helpful article, Jason prescribes a simple math formula that could assist us in setting our personal finance goals. We are usually in a much better position to create a feasible plan – that could be followed easily – when we work with very simple formulas like the one explained in this article.


By [http://ezinearticles.com/?expert=Jason_Markum]Jason Markum

If you are interested in doubling your wealth, it doesn't really mean much unless you create a specific time frame first. If you have any assets or investments that produce income, they will probably *eventually* double your wealth, and you won't have to do anything. Of course it may take 200 years. That's the point of having a time frame.

Yes doubling your wealth within a certain time frame, takes a little bit of planning on your part. Luckily you found this article!

If the money you've invested remains constant, that is, you don't add any to it, then you can use the so-called rule of 72. All you have to do is divide the number 72 by the number of years within which you would like to double your wealth. The number you get when you do that calculation ends up being the percentage you must earn on the money you've invested in order to double your wealth.

For example if you wanted to double your money in 10 years, your investment would need to produce 7.2% increases (72/10) for each of those years. If you wanted to double in five years, you would need to return 14.4%. And if you wanted to double your money in two years, you need to earn a 36% gain on that investment. Pretty easy huh?

If you would like to know what your current investment portfolio is producing, and whether it is producing up to your expectations, review things very carefully. Think about getting rid of investments that aren't doing very well and taking the money and reinvesting it in something that performs better. Think of it this way; look at each of your investments and ask yourself this question... "if I had the cash again when I make the same investment?". If the answer is no, then you know it's time to sell that investment and reinvest into something else.

Good portfolios for building wealth are diversified, and also balanced. For me personally, a good balance is about one third of my assets in stocks, one third in real estate that produces income, and one third in other things; things like annuities and gold, and municipal bonds; things like that.

However your portfolio seems to be balanced, it will grow far quicker if you continue to add to it in a regular fashion. For me I like to add a percentage of all the income I bring in to my investments. This can be in the form of automatic payroll deductions, or an automatic checking account transfer system, or however you'd like to do it yourself.

No matter what you do, it is important for you to remain educated about all of your investments, and upcoming investment opportunities. The more you know about an investment to less risky it becomes. And the closer an eye you keep on your investments, the less chance they will decrease dramatically before you notice and take steps against the loss.

So there you have it! Remember the rule of 72, it's a good plan for setting a time frame for doubling your wealth...

Jason has been writing articles online for over thirteen years. When not writing about finance, Jason runs a very useful website about [http://www.edonatecar.com/]donating cars to charity where he will answer the age old question; [http://www.edonatecar.com/where_can_i_donate_a_car.cgi]where can I donate a car which you definitely need to know!

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