How to Double Your Money? (Inflation Computation)

Posted by Grace under Investing on September 17, 2014

There are certain ways on how to double your money in a specific period of time. The simplest way is by using the “rule of 72”. Maybe you are not familiar with the “rule of 72”, that’s why we have to discuss about it today. Are you ready to invest your hard earned money but you have no idea when will you get the best return on your investments (ROI)?

The rule applied to any kind of investment, whether it is on stocks, mutual funds, UITF, bonds and among others. Take a look of your investment capital. How much are you willing to invest? When do you want to double it? After 3 years, 5 years, 10 years or even 20 years?


How to Double Your Money? (Inflation Computation)

To double your investment capital, analyze the given number in this article. Our example is P100,000.00. How to turn your P100,000 into P1,000,000.00? How to turn your P100,000 investment into P200,000 after specific years. Just divide the 72 into how many years you want to double your money. Then, invest your capital that earns interest? How much interest?

Capital: P100,000
Goal: P200,000
Years Invested: 8 Years
Earn Annual Interest: 9%
Formula: 72/8=9%

This example means if you want to double your money after 8 years then you have to invest your capital in any of the investment products (mutual funds, uitf, stocks) that earns 9% annually. The table below show how many years or how much interest your investment should earn annually.
Double Your Money Using Compound Interest

Due to the effect of compound interest,your money is growing over time. Capital and the profit was added as your total capital. Take a look of the example that shows compound interest;

First Year: P100,000 X 0.09% = P9,000
Second Year: P109,000 X 0.09% = P,9810
Third Year: P109,810 X 0.09% = P9,882.9

The table below will determine how much interest required to earn that will help you double your money. Our example is P100,000. Take a look and analyze it.

Capital     Goal       Years  Earn Interest Formula
100,000    200,000 3           24%         72/3
100,000    200,000 4           18                 72/4
100,000    200,000 5          14.4         72/5
100,000    200,000 6           12                 72/6
100,000    200,000 7        10.285         72/7
100,000    200,000 8            9                 72/8
100,000    200,000 9            8                 72/9
100,000    200,000 10         7.2                 72/10

To make your P100,000 into P1,000,000 you must do the following;

1. Invest your P100,000 that earns 18% annually
2. From P100,000 to P200,000 after 4 years (doubled)
3. Invest it for 16 years and make P1,412,902.25 (inflation of 5% included)
Investing Tips:

To achieve your goal earlier, just make an additional investment of P1,000 per month or P12,000 per year in 12 years so that you can acquire P1,147,932.10 after 12 years.

Investment Capital: P100,000 and additional P1,000 per month

Earn Interest: 18%
Years of Investing: 12 years
Future Value: P1,147,932.10
Investment Vehicle: UITF Equity type, Mutual Fund Equity, Stock Market, Business and Enterprises
Consider Inflation Rates

Purchasing power will not be discuss in detail here. Just think, if you buy a house building materials (example cement) today that will cost P250, next year the material would cost P262.50.

If in the Philippines has an inflation rate of 5% per annum, then, if you want to invest your money, you must invest it that earns above the inflation rate (some say twice the inflation rate, other say at least 7% higher than the inflation rate, other experts will recommend at least above 3% to 4% than the inflation rate).

Inflation Rate: 5%
Plus: 3%
You should invest your money that earns 8% per annum.

Sample Computation Rule of 72 and Inflation Rate

Investment Capital: P1,000,000.00
Goal: P2,000,000.00 after 10 years
Earn Interest (Rule of 72): 7.2%
Inflation Rate: 5%
Total Contribution: P1,000,000.00
Future Value: P2,004,231.36
Total Interest: P1,004,231.36

Conclusion on How to Double Your Money

Anyone who wants to invest and expect to double his investment capital must have a goal. To have an specific goal, he should use the “rule of 72”.

Please also consider that when investing your money, think about the risk, such as economic crisis, political conflicts, world market, typhoons, calamities and other things that might affect investing. In investing, you should beat the inflation rate.

Take Risk and Be Brave

I always remember the old saying “Take risk! If you win, you will be happy, if you lose you will be wise”. That’s true, because in life, nothing can substitute experience. In real life, the happiest people are the player than the spectators or audience. You are a player, right? Compare yourself with the brave investor, while he is taking profits, you are just thinking there how investing works.

Thinking is not the game,investing is! Just like the famous story of “the optimist, the pessimist and the opportunist”. The optimist has a good positive attitude, a pessimist has a negative view in life, the opportunist of course they grab very single opportunity, they think smartly but take action immediately on what they had think. Be an opportunist, you have the opportunity to grow your money while you are young, strong and capable to make money to invest.

Use the formula whenever you invest. Analyze the investment return you can get if you want to double your money in a specific period of time. I hope this “rule of 72” will let you not just to think but act (make a great move) in investing rather than poor money spending habits. Have a blessed financial journey! Prosperity to all of us.

Now you know how to double your money. Try to invest money in the stock market that earns at least 8 percent per year. Thank you for reading this article at Kindly share this post to spread financial literacy.

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