I want to understand the stock market!

Don’t even go there, the question you should really be asking is: “Why should I invest?” The underlying answer that most of us have to that question, even if we don’t say it, “That’s too risky. I know people who have lost everything doing that. I’m not that dumb, I’ll just save in a savings account.”

So the first answer to refining yourself is to ask yourself: “Do I know what the Rule Of 72 is?”so” How will this affect me?”

What Is The Rule Of 72?
The Rule Of 72 goes back at least many hundreds of years. It (The Rule Of 72) was referenced by Luca Pacioli, an Italian mathematician, sometime during the 15th century as a convenient way to determine how long it takes your money to double, assuming you know the interest rate it earns. {Luca didn’t explain the rule much, meaning it possibly goes back even further than that, but the principle still holds true today}.

{Here’s an example: start with any amount of money, let’s say 0.00 to be simple. You invest it at 10%. Using the simplest of math, you take 72 and divide it by 10, and you get the number 7.2, which means your money will double to 0.00 in 7.2 years}.

{If you have 0.00 and you invest in at 7.2%, you take 72 and divide it by 7.2, and you get the number 10, which means your money will double to 0.00 in 10 years.
The same exact principle is true if you start with 0.00 or 0,000.00. That’s all the harder it is}.

Do we concur? Well, not precisely. The Rule Of 72 is a good general estimation if you assume that your interest compounds once per year, when actually it might compound monthly or daily – but if it does, that’s only to your benefit. There are financial calculators which are much more accurate, but this is a simple idea that gives you a good general working answer.

What does this have to do with me?
Let’s assume you really are thinking like our hypothetical person at the start of this article, and you “know better” than to get into the stock market, so you just dump some money every month into a savings account. Is it enough that you save doesn’t that make you feel comfortable knowing that some don’t save at all?

Let’s see.
So you’re in a savings account which, in today’s market, perhaps pays you something like 0.2% if you’re like most people and maybe 3%, if you’ve got a lot of assets and your mortgage there, too. If you are part of the second group and you are earning 3%, you would take 72 divided by 3, you would get….I believe you miss out on a lot of living waiting for your money to double in 24 years.

If you are the former and this 0 is what you are earning.2% yeah this would be great if you are looking to double your money in 3,600 years! It is this easy?

Are you retired and only buying 3% CD’s? If inflation is zero and you don’t withdraw ANYTHING your money will double in 24 years. Inflation for the last 200 years in the USA has averaged 3%, currently it is nowhere close to that. In all honesty 3% is no return at all, this is true in most cases.

What does this have to do with educating yourself about the stock market? This is the answer why you should be involved in the first place. Being involved and having an advisor to help you stay ahead of the game will keep your goals in perspective and help you support yourself and your family with a lot less stress.