The Power of Compounding (Rule of 72)


 The Power of Compounding (Rule of 72)

For those of you who are not into economics or finance, The Rule of 72 is a simple way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.

For example, the Rule of 72 states that $1 invested at an annual fixed rate of 10% would take 7.2 years ((72/10) = 7.2) to grow to $2. In reality, a 10% investment will take 7.3 years to double ((1.10^7.3=2). The second half of the sentence is not for Lawyers, who are usually “Numbers Challenged”—with the exception of my Beautiful sister-in-law, Aminata Mahoney, of course!  Laugh!!!!!!!!!

To further drive the point home: Little trivia! In 1626, Peter Minuit bought the Island of Manhattan (New York) from the Manhattoes Indian tribe, for trinkets valued at $24. If Peter Minuit, who became the Dutch Governor of New Amsterdam (now New York), had invested the $24 in a savings account yielding 8% in 1626, and did not redeem it till the year 2016, 390 years later, the investment would have been worth about 60 trillion US dollars (24 x 1.08) ^390, more than the value of all real estate on the island of Manhattan, and about the GDP of the top 20 wealthiest countries (the G20). The then Dutch governor of Manhattan Peter Stuyvesant surrendered the island to the British on September 8th, 1664.


Tumbul Trawally
Seattle, USA

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