If you’ve heard some people talking about the rule of 72 as of late, then you might want to know what it’s all about. Some people are really keen on utilizing this rule to help them calculate their investments carefully. Essentially, this is a formula that helps you to estimate how many years it will take for you to be able to double your money on a given investment. People have been using this formula for many years to quickly calculate the value of certain investments so that they can make informed decisions.
Of course, you don’t really need to know the formula as much as you used to due to modern advances in technology. Both calculators and spreadsheet apps will already be able to do this for you with the simple push of a button or tap of a key. Regardless, the rule of 72 formula is great for making calculations in your head when you aren’t near your phone. Read on to learn a bit more about this useful formula.
The Formula
The formula is incredibly simple to remember and it doesn’t involve any complex math. The years it will take to double your money on an investment will be the number 72 divided by the interest rate. So long as you can remember that, you’ll always be able to calculate the numbers in your head before committing to an investment. If the interest rate that you have is eight, then you divide 72 by eight to get the number nine.
This Formula Works for Many Things
This formula is useful for many different types of investments, and that is why it has become so famous over the years. You can use this formula to determine things about investments, but it can also be used for inflation calculations. People use it to help determine GDP and it also helps with population estimates. It’s easy to see just how important this simple formula has become in modern times even if people don’t have to do the math in their heads these days.
It’s also fantastic for helping you to truly understand the concept of compound interest. You can use this formula to get a better picture of how you can double your money in a fairly short amount of time. When you’re trying to make good investment decisions, it’s always good to keep the rule of 72 in mind. Doing so should help to guide you as you continue to grow your wealth.