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Investing and The Rule of 72

Investor behavior has become the subject of quite a bit of study the past several years.  There even is a name for it-Behavioral Finance.  As academic people often do, a whole terminology has been invented to describe the psychology behind the investing decisions of the average investor.  The field uses terms like herding, loss aversion and availability bias.  I’m not sure the message is getting through.  Revealed in J.P. Morgan’s most recent Guide to the Markets the amount of money held in cash accounts is estimated to be more than twelve trillion dollars.  That is 70.2% of the money supply as a percentage of nominal GDP.  The historical average is 53.9%.

So what does this have to do with the Rule of 72?  The Rule of 72 is the formula that tells you how many years it will take to double your money based on the return you are getting.  At money market rates, it takes more than 144 years!  You can see the calculations yourself at . For many, I suppose, it doesn’t matter.  Safety of principal is the most important.  If you are investing in cash because you are trying to time the markets, you may be a little late.

All of this is a reason to consider working with a financial advisor because an advisor that takes the time find out what’s important to you and help you make better decisions will make a difference to you and your family over the long term.

There is no affiliation between J.P. Morgan and or their affiliates and INVEST.


About LPL Financial
LPL Financial (Nasdaq: LPLA) was founded on the principle that the firm should work for the advisor, and not the other way around. Today, LPL is a leader in the markets we serve,* supporting nearly 20,000 financial advisors, and approximately 800 institution based investment programs and 500 independent RIA firms nationwide. We are steadfast in our commitment to the advisor-centered model and the belief that Americans deserve access to personalized guidance from a financial advisor. At LPL, independence means that advisors have the freedom they deserve to choose the business model, services, and technology resources that allow them to run their perfect practice. And they have the freedom to manage their client relationships, because they know their clients best. Simply put, we take care of our advisors, so they can take care of their clients

*Top RIA custodian (Cerulli Associates, 2020 U.S. RIA Marketplace Report); No. 1 Independent Broker-Dealer in the U.S (Based on total revenues, Financial Planning magazine 1996-2021); No. 1 provider of third-party brokerage services to banks and credit unions (2020-2021 Kehrer Bielan Research & Consulting Annual TPM Report); Fortune 400 Company as of June 2021. LPL and its affiliated companies provide financial services only from the United States.

Jones & Company and LPL Financial are separate companies.

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