The Rule of 72 is an important rule of thumb used in finance and investing. It states that to approximate the number of years required for an investment to double in value, the investor simply divides the number 72 by the expected annual rate of return. For example, if an investor expects a 6% return on their investment, then the approximate number of years required for their investment to double in value is 12 (72/6).
The Rule of 72 is a useful tool for investors to estimate how long it may take to achieve their financial goals. It also helps them gauge how much risk they are willing to take on and how much they need to save to meet their goals. It’s useful for comparing two different investment options. By comparing the expected annual returns on two different investments, investors can determine which one will double their money the fastest. This can help investors make informed decisions about which investments to pursue.
In short, the Rule of 72 is a simple but effective tool for investors to estimate the time required for an investment to double in value and compare different investments. By understanding and applying the Rule of 72, investors
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