Before the stroke, Marty had great control of his limbs. As a machinist, that’s a very good thing.
Running steel through a lathe when you’re unstable, not so good.
He’s long since retired, and his health continues to slide.
He’s taken up baking. He likes making breads, and that’s much different from running a lathe.
Machinists start with a piece of metal and shape it, like a sculptor, strategically cutting, carving, and reducing it to whatever is needed to become the part of the product or machine that’s needed.
Baking is just the opposite. When he’s making a bread, he’s combining ingredients and usually lets them rise into the finished product. Any shaping is done using a container into and out of which the bread grows.
When a softball size lump of bread dough rises, it more than doubles. Then it gets knocked back down and put into the oven only to rise again.
Ralph Bender here for Enduring Wealth Advisors®
Doubling the size of a portfolio takes time, but just like there’s rules to baking bread, there is a rule for doubling an investment.
It’s called the rule of 72s and it’s pretty simple, (aside) for numbers people.
Divide the rate of return into 72 and you’ll see how long it takes to double.
If your investment gets 3 percent, it’ll double in 24 years.
If your investment earns 9 percent, it’ll double three times in those same 24 years.
At 3 percent 100,000 becomes 200,000 but at 9 percent, it doubles two more times. That’s to 400,000 and then 800,000 in 24 years.
Nine percent is a touch below the average annual return of the stock market since 1950, as measured by the S&P 500 index, according to Yahoo!Finance[ 9.25% is the arithmetic average price return of the S&P 500 index for calendar years from 1950 through 2020, excluding dividends. The total return is higher.
And that’s why long term investments belong in the stock market.
Give us a call if your dough needs to rise.
This is a hypothetical example and is not representative of any specific investment. Your results may vary.
The rule of 72 is a mathematical concept and does not guarantee investment results nor functions as a predictor of how an investment will perform. It is an approximation of the impact of a targeted rate of return. Investments are subject to fluctuating returns and there is no assurance that any investment will double in value.
Indexes are unmanaged and you cannot invest directly into an index.