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 best investments on the JSE right now (by Ashburton Fund Managers)

3 best investments on the JSE right now (by Ashburton Fund Managers)

Looking for stock picks? The Money Show’s Bruce Whitfield interviews Fund Manager Jason Forssman.

Want to retire rich? Mind your mind (not only your money)

Want to retire rich? Mind your mind (not only your money)

The Money Show’s Bruce Whitfield interviews Financial Life Planning Institute Certified Financial Planner Kim Potgieter.

3 best shares to buy right now (by Falcon Crest Asset Managers)

3 best shares to buy right now (by Falcon Crest Asset Managers)

Looking for stock picks? Bruce Whitfield interviews Falcon Crest Asset Managers Chief Investment Officer Farai Mapfinya.

3 best shares to buy right now (according to Portfolio Manager Nesan Nair)

3 best shares to buy right now (according to Portfolio Manager Nesan Nair)

The Money Show’s Bruce Whitfield asks Sasfin Securities’ Nesan Nair what he thinks are the best companies to invest in right now.

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
Pick n Pay's magnificent 7 errors with Super Animals cards

Pick n Pay's magnificent 7 errors with Super Animals cards

Pick n Pay has been alerted by customers to errors on the latest Super Animals cards.

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.

Budget 2017: DA hoped for spending cuts, not tax increases

Budget 2017: DA hoped for spending cuts, not tax increases

The DA believes that raising taxes is not the answer to South Africa's economic woes and propose more cost-cutting for government.

Meet self-made millionaire (net worth – R400m!) property mogul Sisa Ngebulana

Meet self-made millionaire (net worth – R400m!) property mogul Sisa Ngebulana

How did Ngebulana build his empire? The Money Show’s Bruce Whitfield interviewed him for his weekly “ShapeShifter” feature.

Stephen McGowan's family still hoping for his return after 2011 Mali abduction

Stephen McGowan's family still hoping for his return after 2011 Mali abduction

The Gift of The Givers and the government are both working to secure his release.

5 most important years in anyone’s life (when it comes to investing)

5 most important years in anyone’s life (when it comes to investing)

How old are you? Financial advisor Warren Ingram discusses the five most important ages in anyone’s investment career.

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.