Question 1: “Why should I invest?” The underlying answer that most of us have the same question, even if we don’t say it, “That’s too risky. I don’t want to lose everything by doing that. Am I being ignorant, I have a savings account.”

So the first answer to calming 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}.

Now, is it accurate? So, this is not exactly precise. If you assume that in The Rule Of 72 interest compounds yearly you are happy, how would you feel if it compounds monthly or even daily. The general idea is this for a very accurate answer you should use a financial calculator found on www.uscertifiedfinancialplanner.com.

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. Don’t get comfortable with the idea that you’re better off than people who don’t save at all – you are, but is it enough?

Let’s take a look at this for a second.
So you’re in a savings account which, in today’s market, probably pays you somewhere between 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’re in the latter of those two groups and earning 3%, then we take 72 and divide it by 3, and we get….to have your money double in 24 years. Ouch! I think you could do much better.

If you’re in the former group and earning 0.2% yeah this would be great if you are looking to double your money in 3,600 years! Cool, huh?

If the market is making you nervous because you are retired, only buying 3% CD’s is going to have your money doubling in 24 years providing inflation is zero. Even though that inflation rate is pretty close to the truth right now, it’s nowhere close to normal, since the average inflation rate in the United States is around 3% for the last 200 years. That means a 3% return is roughly equal to no return at all, most of the time.

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.

Technorati Tags: Certified Financial Planner, Compound interest calculator, Compound Interest Formula, how to invest in stock, How to Invest Stock, Invest Stock, Invest young, Learn Stock, learning Stocks, Microsoft, play the stock market, recovering economy, rule of 72, Stock investi