How to Assess ‘Double Your Money’ Investments


How to Assess Double Your Money Investments

Using the Rule of 72

Kung may nag-alok na sa’yo ng investment product, maaring narinig mo na ang linya na ‘to:
“Do-doble ang pera mo!”
and quite often, marami sa atin kapag naririnig ito ay napupukaw talaga ang atensyon. However, we should not be convinced to invest by this statement alone.

Although there’s nothing wrong with it, we must also consider other factors such as:
1. the time required for the investment to grow and
2. the interest rate at which money should grow every year.

If we don’t consider these, we might end up owning an investment na hindi naman talaga bagay sa’tin.

One simple way to assess how these “double your money” investments work is by using
the rule of 72.

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WHAT IS THE RULE OF 72?

The ‘Rule of 72’ is one of the simple ways to know how long an investment will take to double, given a fixed annual rate of interest.

It works by dividing 72 with the annual interest rate of the investment. The answer will give you a rough estimate of how many years required to double your money. (Again, the result is only a rough estimate but this figure will help assess if you really have the time to invest that long.)

Formula:
72/interest rate = years to double your money

For example, at 6% annual interest, your money will take 12 years to double.

Take note that this formula only applies for double your money scenarios. (It will NOT work in triple, quadruple, or other growth scenarios.)

REALISTIC OR NOT?

You can also use this formula in reverse.
72/years to invest = required interest rate per year

Example, if you want your money to double in 12 years, then you would want an investment with an annual 6% return.

By applying the Rule of 72, you will begin to see if what being offered to you is a bit suspicious or not. How? If they say “I will double your money in 5 years”, 72/5 ano yan? That’s 14% per year.

Remember the money will have to make 14% a year without fail. Hindi pwede pumalya to actually double your money. Now are there investments that make 14% a year CONSISTENTLY? dati meron. There were bonds that used to do that. Ngayon, as far as I know, wala.

DOUBLE YOUR MONEY IN 20 YEARS

There are a lot of products being offered right now that will double your money in twenty years. Sounds good? Let’s take a closer look.

72/20 is equals to 3.6. That’s 3.6 percent per year.

Diba parang ang ganda pakinggan ng “double your money in 20 years”? eh 3.6% a year in 20 years, does that sound as good as double your money in 20 years? It’s like saying you are willing to get tied to an investment for 20 years making only 3.6% per year.

Moving forward in 20 years, ang presyo kaya ng bilihin ay tataas or bababa? Baka tumaas diba? Paano kung hanggang 3.6% lang lumalago ang pera mo compared sa 5-6% na pagtaas ng bilihin? Your money will actually lose value.

Kaya importante na ang investment na pipiliin mo should consistently be growing above inflation. Learn more at “Ang Pera Mo at Ang Halaga Nito”.

Simple lang diba? Kagaya nga ng lagi ko na pinapaalala, aral muna bago invest. Hindi lahat ng maganda pakinggan na investment ay iyon na ang pinakabagay sa iyo. Dahil kung hindi mo inaral ang mga ito, maaring ma-kompromiso ang kinabukasan mo at ng pamilya mo.

Aya Laraya, Investment Advocate

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Comments

  1. says

    ano naba kasi balita don sa House Bill no. 490 Financial Literacy Act?
    By the way maraming salamat Sir Aya at may natutunan na nman kami.
    GOD BLESS at more power to you.

  2. mchelle says

    I want to start investing in the stock market thru COL. However, at their web, one of the requirements is a bill under your name. I don’t have such. Paano na po yun?

    • cool says

      Hi, try to attend their free seminars, then after that fill up the form there and just present 2 valid id’s. Alam ko nga basta personal appearance ok na e plus 2 valid id’s.

      • Salvador says

        Hi aya,

        Thanks for the valuable information.
        Btw, in case I want to buy stock, do you have a procedure on how to do it especially if I am working overseas?
        Also, can you recommend a broker who can assist me on this?

  3. says

    Admiring the hard work you put into your website and detailed information you present.
    It’s nice to come across a blog every once in a while that isn’t
    the same unwanted rehashed information. Fantastic read! I’ve saved your site and I’m
    adding your RSS feeds to my Google account.

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