The desire to double one's money stems from a deep component of our investor psychology—the risk-takers in us who want a fast buck. However, two connected factors must be addressed while making such efforts: time and danger. This relates to both your risk tolerance and time horizon, as well as the characteristics of the investment itself, such as the time it may take to double, which is a consequence of the investment's riskiness.
Your investing time horizon is a critical factor in determining how much investment risk you can take on, and it is mostly determined by your age and financial goals. A young professional, for example, is likely to have a lengthy investing horizon, which allows them to take on a large amount of risk since time is on their side when it comes to recovering from losses. But what if they're saving for a home purchase in the next year? In such a situation, their risk tolerance will be low, since they cannot afford to lose a significant amount of money in the event of a market drop, which would threaten their main investment goal of purchasing a home.
The Rule of 72 is a well-known formula for determining how long it will take for an investment to double in value if it grows at a rate of 8% per year. Simply multiply 72 by your estimated yearly return. The number of years it will take to double your money is the outcome. Doubling your money is a realistic objective that most investors may aim for, and it is not as intimidating as it may seem to a beginner investor.
Your risk tolerance, investing time horizon, and personal preferences all play a role. Most individuals benefit from a balanced strategy that includes investing in a diverse mix of shareholder equities and bonds. Those with a larger risk appetite, on the other hand, may want to invest in more speculative assets while others may seek to double their money via equity brokers.
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