MyMoney Online

Keep it real with Rule 72 (an easy formula that really works)

Inflation – the enemy

The inflation rate represents the rising cost of living which devalues your money, resulting in a loss of purchasing power over time. To improve the value of your rand into the future you need to make investments which provide returns that are higher than the inflation rate.

Keep it real

Real rates are important if you want your investment value to grow above the cost of living. The difference between the nominal rate of return and the inflation rate is the real rate which represents your actual value over time.

So lets use the rule of 72 to compare how various rates of return affect your future values. The rule is...

Length of time it takes to double your money = 72 divided by the expected return on your investment

If you achieve 12% rate of return then you divide this into 72 and the answer 6 is the number of years it will take for your money to double in value. So, if you invested R10 000 at 12% in 6 years time you will have R20 000.

If you expect a 6% return on your money it will take (72/6=12) 12 years for your money to double.

So the same R10 000 takes twice as long to get to R20 000.

The rule of 72 is a magical number which easily works out future values with amazing accuracy. We should all be mindful of how it can help to understand the future value of money.

Listen to the audio below for more information...

Read more from Paul Roelofse at www.investforlife.co.za

702 welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the 702 community a safe and welcoming space for all.

702 reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

702 is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
3 hottest JSE stock picks of the week (by Cannon Asset Managers)

3 hottest JSE stock picks of the week (by Cannon Asset Managers)

These three shares are the best investments on the JSE right now, says Cannon Asset Managers Portfolio Manager Samantha Steyn.

Best investment on the JSE (and 2 offshore stocks to consider) – by Rand Swiss

Best investment on the JSE (and 2 offshore stocks to consider) – by Rand Swiss

Invest yourself rich! Rand Swiss Portfolio Manager Singa Gungqisa shares his stock picks of the week on The Money Show.

Hottest stock on the JSE right now (post-Cabinet reshuffle) – Vestact

Hottest stock on the JSE right now (post-Cabinet reshuffle) – Vestact

Looking for a hot tip? The Money Show’s Bruce Whitfield interviews Vestact Portfolio Manager Byron Lotter.

3 best investments in the world right now (by Mia Kruger)

3 best investments in the world right now (by Mia Kruger)

Hot tip alert! Mia Kruger of Kruger International Asset & Wealth Management shares her stock picks of the week on The Money Show.

Understanding inflation with the Rule of 72

Understanding inflation with the Rule of 72

The magical number 72 in the financial world can help you get a better understanding of the value of your money in the future.

The magical rule of 72.

The magical rule of 72.

Weekend Breakfast's Paul Roelofse explains how the number 72 has an uncanny ability to calculate the future value of money.

Popular articles
'Land restitution failed because Government is the biggest owner of land'

'Land restitution failed because Government is the biggest owner of land'

Bruce Whitfield interviews Finance Minister Malusi Gigaba's advisor Chris Malikane and Business Leadership SA's Bonang Mohale.

Winter blues got you down? What you must know about Seasonal Affective Disorder

Winter blues got you down? What you must know about Seasonal Affective Disorder

Don't brush off that yearly feeling or a seasonal funk. Here's how to help keep your mood and motivation up throughout the year.

So what exactly is radical economic transformation?

So what exactly is radical economic transformation?

Wits associate professor of economics Christopher Malikane speaks to Azania Mosaka about the term that is being bandied about.

ANC MP Makhosi Khoza writes about "leadership injudiciousness" in the party

ANC MP Makhosi Khoza writes about "leadership injudiciousness" in the party

Concerned ANC MP Dr Makhosi Khoza writes a heart felt Facebook post detailing immoral leadership and personal challenges.

It's not the end of the road... Top tips to improve your matric

It's not the end of the road... Top tips to improve your matric

"Recognise that it’s not the end, it’s the beginning." Expert advise for school-leavers who want to improve their results.

NSFAS to reopen 2017 applications

NSFAS to reopen 2017 applications

National Student Financial Aid Scheme says it will reopen 2017 loan applications after receiving requests for deadline extension.

'Collect experiences, NOT possessions!' - Paul Theron (Vestact MD)

'Collect experiences, NOT possessions!' - Paul Theron (Vestact MD)

Bruce Whitfield interviews the razor-sharp tongued Vestact MD Paul Theron about his money hopes, fears, successes, failures, etc.

3 easy questions could bag you R2000!

3 easy questions could bag you R2000!

WIN R2000! But only if you can prove you're a whiz of the MTN Biz Quiz by answering the following three questions...

Blesserfinder: Matching you with a sugar daddy near you

Blesserfinder: Matching you with a sugar daddy near you

Is social trend Blesserfinder, where girls are allegedly matching up with rich 'benefactors' in exchange for sex, a real thing?

5 reasons why the tourism industry is sceptical about the latest numbers

5 reasons why the tourism industry is sceptical about the latest numbers

The tourism industry is questioning the veracity of the surprisingly upbeat tourism figures and the timing of their release.