It's probably the one your friend was talking about. And it's really useful. It goes like this: That will give you roughly the number of years it will take for your investment to double. On a 10 per cent return, it will take a bit over 7 years. You can use it backwards, too. If the value of your house, share fund investment or whatever has doubled in eight years, you've earned a 9 per cent return on it. If it has doubled in just six years, your return has been 12 per cent.
What's more, 72 is rather convenient, as lots of other numbers divide evenly into it. I use the 72 Rule often for off-the-top-of-the-head calculations. Investors should be aware of financial markets' cyclical nature, and try to take advantage of this, as there can be, say, a 5-year cycle more or less. The drop in prices for various financial products shares, index funds, trust funds caused by the New York tragedy was an ideal time for people to invest, because investors - including myself - overreact to bad news. I would say leave your money on short-term deposits until a market downturn occurs, and then transfer cash funds to investment situations.
You can't always achieve this, but it is still better than investing your cash somewhere near the top of the market cycle and being locked in at a loss for four or five years. As you say, you must be in for the long term. So why not wait and take full advantage of a market downturn? To quote an article on the same page as yours a few weeks back: You've got one of the messages that I keep trying to hammer home, that investments such as shares must be long term.
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Everything you say would be valid if only we knew, at the time, that the markets had hit bottom. To use your New York example, markets plunged right after the terrorist attacks. So why didn't we all rush in to buy shares at bargain prices? Because we worried that prices would drop still further.
Your quote about high returns following global crises was just one of many similar messages.
Within days of September 11, we saw graphs showing that the sharemarket rose fast in the year following most other crises. And I'm sure we will all wonder the same thing next time something extraordinarily bad happens. As for a "five-year cycle more or less", there's so much "more or less" in any share- market cycle that it's useless in helping you try to time your purchases.
I agree with you that investing at a time that turns out to be near a market peak is really discouraging. It's all too easy, if you're in and out of markets as you suggest, to miss out on a sudden bull run.
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For all we know, world markets might zoom up, starting Monday. They might also plummet. Heaps of research shows that those who get in and out of shares end up worse off than those who go into the market and stay. By far the best strategy is to spread out your purchases, buying regularly once a month or every three or six months, regardless of what the markets are doing. If you invest the same amount each time, you benefit from what's called dollar cost averaging.
The price fluctuations are rather extreme, but that's just to make it easy to follow. Over four months at that price, you get units.
Over four months at that price, you get 48 units. Over four months at that price, you get 30 units.
Over the year, you've bought a total of units. Without even thinking about it, you've bought more units when they were cheap, and fewer when they were expensive.
This works well for regular saving. But what if you've just got a lump sum, perhaps from an inheritance or redundancy money? Because you won't know, until later, whether now is a good or bad time to buy, it's best to spread out your purchases of shares or share fund units.
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A post-dated cheque is a cheque issued with a written date in the future or dated after the date of issue. Section 13 2 of Bills of Exchange Act Act A bill is not invalid by reason only that it is ante-dated or post-dated If a bank notices a post-dated cheque presented for payment before the date appearing thereon, the cheque will be returned marked post-dated or the bank will hold on to the cheque until it is able to be cashed in. The greatest danger lies in the banker paying a post-dated cheque and subsequently dishonouring another cheque which ought to have been paid but had to be returned due to lack of funds.
Therefore, the practice of issuing or accepting a post-dated cheque is not encouraged.
This is to avoid any incidence of returned cheque due to insufficient funds and the resulting penalty charges. It causes inconvenience to all parties - drawer, drawee and payee. November 14, Tags: What is the difference between order cheque and bearer cheque? What is a bearer cheque? What is an order cheque?