The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.
The formula for this particular application of the Rule of 72 is: Required CAGR to Double Money = 72 divided by number of years in which you wish to double your money.
The rule of 72 is a formula used to determine the amount of time it will take for invested money to double at a given compound interest rate, which is 72 divided by the interest rate. ... If a commodity increases by 7.2 percent per year, the rule of 72 tells us that its price will double every 10 years.
Here's how the Rule of 72 works. You take the number 72 and divide it by the investment's projected annual return. ... For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.
At 10%, you could double your initial investment every seven years (72 divided by 10). In a less-risky investment such as bonds, which have averaged a return of about 5% to 6% over the same time period, you could expect to double your money in about 12 years (72 divided by 6).
But Albert Einstein is not the brains behind the Rule of 72, nor did he originate, or perhaps even utter, the quote. The Rule of 72 is a shortcut to estimate how long it will take an investment to double in value.
Similarly, if you want to double your money in five years, your investments will need to grow at around 14.4% per year (72/5). If your goal is to double your invested sum in 10 years, you should invest in a manner to earn around 7% every year. Rule of 72 provides an approximate idea and assumes one time investment.
The Rule of 115
It's as simple as dividing your interest rate by 115. The quotient is the amount of time it will take you to triple your money. For example, if your money earns an 8 percent interest rate, it will triple in 14 years and 5 months (115 divided by 8 equals 14.4).
The Rule of 72 helps investors understand how long it will take for their initial investment to double. Understanding at an early age how money grows is important. ... The Rule of 72 provides an estimate on the number of years it will take money to double in respect to the interest rate.
The 2% rule is an investing strategy where an investor risks no more than 2% of their available capital on any single trade. To apply the 2% rule, an investor must first determine their available capital, taking into account any future fees or commissions that may arise from trading.
The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. When using the rule of 70, the number 70 is used in the calculation. Likewise, when using the rule of 72, the number 72 is used in the calculation.
What Is the Rule of 70. ... The rule of 70 is a calculation to determine how many years it'll take for your money to double given a specified rate of return. The rule is commonly used to compare investments with different annual compound interest rates to quickly determine how long it would take for an investment to grow.
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