Rule of 72

[AhMeng]

https://blog.seedly.sg/how-long-does-it-take-to-double-your-money/
How Long Does It Take To Double Your Money In Singapore?
blog.seedly.sg

The power of compound interest

This illustrates that at a higher interest % rate per year, you would require fewer years to double your money. In Singapore particularly, there are unique products like the CPF which also helps to support each individuals endeavour to grow his or her money.

The beautiful rule of 72

You can see in the chart illustrated above, where the black numbers on top represent the number of years, and the interest % represents the rate of return needed to double your initial capital.

It is compressed into this simple formula you can see here:

Simply divide 72 by a constant Rate of return, one will be able to derive the amount of time required for their investment money to double.

Rate Of Return	Number Of Years For Investment Money To Double	Examples

Financial Product	Risk Level	Interest Rate Per Year (Return)	Time to double capital
Savings Account	Lowest	1%	72 Years
CPF OA	Lowest	2.5%	28.8 Years
Bonds	Low	3%	24 Years
CPF SA	Lowest	4%	18 Years
Index ETF (eg STI)	High	6%	12 Years
DIY Stock picking	Highest	10%	7.2 Years

An example: What strategy to double $10,000?

Joe, 25 just graduated recently and has been working for over a year now. He has been reading up and is looking for ways to make his money work for him.

Step 1: Determine your investible cash
He has saved up $10,000 excess cash (outside of rainy day savings) and aims to invest all of this $10,000 into the market today.

Step 2: Determine your investment timeframe

For Joe, as he is younger, he has plans to set aside this $10,000 for a period of around 20 to 25 years.

Step 3: Understand which products meet his time requirements

We have the full list of investment products herefor you to understand. But instead, let us simplify it for this example.

Joe would probably choose to either

• Top up his CPF SA (but this will go beyond the 20-year mark but at a higher interest rate) or
• Buy into a 10 to 20-year bond which offers him an interest of around 3%.

Financial Product	Risk Level	Interest Rate Per Year (Return)	Time to double capital
Savings Account	Lowest	1%	72 Years
CPF OA	Lowest	2.5%	28.8 Years
Index ETF (eg STI)	High	6%	12 Years
DIY Stock picking	Highest	10%	7.2 Years

Conclusion: This is the foundation of investing

At the end of the day, this is probably one of the easiest approaches to understand the compounding effect of money and also what products meet your timeframe.

Do your own due diligence and if you are keen to learn more, you can find out more about when you should look at investing, and what portion of your monthly income you should set aside for investments. Cheers!

 

[eatshitndie]

just from my own investment perspective, my portfolio was originally split 6.9 ways into stocks, mutual funds (large and mid caps), insurance policies, annuities, real estate, 401k savings (retirement account with contribution by companies i work for), and cash (including cd’s, money markets, etc.). while stocks go up and down with a few star performers bringing in real good returns, mutual funds languish below the 6.9% rate, insurance policies scratch at par as they are also invested in slow performing mutual funds, annuities rachet at around 6.9%, cash makes a paltry 0.69% year after year, 401k doubles and triples for the last 26.9 years (great), real estate is the best performer by far (greatest). real estate alone quadruples over 26.9 years and contributes to the lion share of total assets. moreover, it generates a steady and increasing incum on rent contributing to the cash pile, especially when rents go up 6.9% every year due to increasing demand and decreasing supply. another benefit it brings is that depreciation (of capital) is highly deductible over 20 years when it cums to tax filing. all rents collected are more than evened out by depreciation. this is only applicable to investments in sillycon valley, but generally, common sense principles still apply when not in sillycon valley.