What is the Rule of 72?

Q. Someone mentioned the Rule of 72. What does it mean?

Josie’s answer - I love the rule of 72 which is a very handy to remember.

It is known as the rule of 72 because it can give you a quick answer as to how quickly your investment can grow by re-investing your investment’s earnings. It tells you how many years (give or take a month) it will take to double your money at a given rate of return.

You need to start with the number ‘72’. You then determine what rate of return you expect to get on your investment. By dividing this return into 72 you will know for how many years you need to invest to double your money. Read more

Please tell me when the share market started to decline

Q. I listen to the show every week. Could you please tell me with reasonable accuracy when the share market started to decline. Thanks Robyn

Josie’s answer: Hi Robyn. Thanks for your question and I am crossing my fingers that your investments have not suffered too much with the recent volatility.

I am assuming you are referring to the All Ordinaries Index, which represents the top 500 stocks listed on the Australian Share Market.

This index appears to have peaked on 1st November 2007 at 6853. As at today’s date (2nd April 2008), the index closed at 5544, which means it has dropped approximately 19% since that date (as you would know it has been lower!).

To get back to its peak, the market now needs to increase by nearly 24%. Who knows when it will reach its peak again, but historically speaking it is not unusual to see it exceed its previous high within 5 months. Read more

What happens If I die without a will?

Q. Hi Josie. I turned on the news after work today and it was one tragedy after another….which got me thinking, if I die today, what will happen if I don’t have a will in place?

Josie’s Answer – You’re right about the news….which is why I don’t really mind if I miss it ever now and then.

To your question, It is recommended that everyone has a will, even if you think you have no money.

You might have some in your super fund that you have forgotten about. If a person dies without leaving a will they are said to die intestate and how it is divided up depends on where you live. Read more

We’re Having Trouble Saving for a home - Any Suggestions?

Q. My wife & I are finding it very difficult to save for a deposit on a new home. Any suggestions?

Josie’s Answer - This is a very daunting task considering that most new borrowers need to save approximately 10% of the home value in order to get into their first home.

You should you think about opening a high interest savings account (see Rate City) and have a portion for your salary (at least 10-20%) automatically transferred into this account each month. Read more