Div Tip #4: Know the Rule of 72.

The Rule of 72 is best kept close at hand when dividend farming.  It helps me quickly assess my goals against my investment horizon and determine whether or not I’m on track.  I know if my dividend stream is growing at 12% annually it’ll double in 6 years but if it falls to 10% it’s obvious I’ll have to work 7+ years – more than one extra -- or find another way to make up the shortfall.

I also know that if I lose 1% in transactions costs reducing my return from 6% to 5%, for example, I’ll have to work nearly 2.4 years longer (12 vs 14.4 respectively) to make up the loss to the broker.  That’s handy information when a silver tongued salesman is pitching a heavily loaded investment vehicle.