Quick Peek:
Want to know how long it will take for your investment to double in value? The « magic number 72 » can help. This rule of thumb involves dividing 72 by the interest rate an investment will receive or dividing the number of years to double money by 72 to give the required rate of return. While it has limitations, it’s a useful tool for making informed investment decisions. So, if you want to grow your wealth, the magic number 72 could be your new best friend.
The Magic Number 72: A Simple Rule to Help You Grow Your Money
Have you ever wondered how long it would take for your money to double in value? Or what interest rate you would need to achieve that goal? The answer may be simpler than you think. It all comes down to a little number called 72.
What is the Magic Number 72?
The magic number 72 is a simple rule of thumb that can help you estimate how long it will take for your money to double in value. The premise of the rule revolves around either dividing 72 by the interest rate your investment will receive, or inversely, dividing the number of years you would like to double your money in by 72 to give you the required rate of return.
For example, if you want to know how long it will take for your investment to double in value with an interest rate of 6%, simply divide 72 by 6. The answer is 12 years. If you want to double your money in 10 years, divide 10 by 72. The answer is 7.2%, which is the required rate of return.
Why is the Magic Number 72 Useful?
The magic number 72 is a useful tool for anyone who wants to grow their money. It provides a quick and easy way to estimate how long it will take for your investment to double in value, or what interest rate you need to achieve that goal.
The rule is especially helpful when it comes to long-term investments, such as retirement savings or college funds. By using the magic number 72, you can make informed decisions about how much money to invest and what kind of return to expect.
Limitations of the Magic Number 72
While the magic number 72 is a useful tool, it is important to remember that it is only an estimate. The rule assumes a constant rate of return, which may not be the case in real life. It also does not take into account taxes, fees, or inflation, which can all affect your investment returns.
Additionally, the rule is only applicable for investments that compound interest. If your investment does not compound, the rule will not work.
Conclusion
In conclusion, the magic number 72 is a simple and useful rule of thumb that can help you estimate how long it will take for your money to double in value, or what interest rate you need to achieve that goal. While the rule has its limitations, it is a helpful tool for anyone who wants to grow their money and make informed investment decisions. So, next time you’re thinking about investing, remember the magic number 72 and use it to your advantage.
References for « What is the magic number 72? »
- Wikipedia – Rule of 72
- Investopedia – Rule of 72
- The Motley Fool – Rule of 72
- Bankrate – Rule of 72
- Business Insider – What is the Rule of 72?
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