2/27/2023 0 Comments Your moneymoney rules![]() ![]() ![]() “This can help the investor to understand if they need to save more, and if so, how much more they need to save in order to reach their financial objectives,” says Chuck Mattiucci, AIF, senior vice president, Fort Pitt Capital Group in Pittsburgh.įinancial professionals will use the rule of 72 when they need to run a calculation “on the fly,” Mattiucci says. ![]() Why do investors need to understand the rule of 72?įirst of all, using this rule is a simple way to help you estimate how your money may grow over time. An investment with a 50 percent rate of return will double in 1.71 years, but the rule of 72 will estimate 1.4 years. For example, an investment with a 7 percent rate of return will double in 10.24 years, while the rule of 72 will estimate 10.3 years. For investments with lower rates of return, the estimate is closer to the actual result. The rule of 72 provides a rough estimate, but it’s not exact. The quotient is a rough estimate of the number of years it will take for your initial investment to double. You just divide 72 by the annual rate of return. The rule of 72 is a quick calculation to determine the number of years it will take for an investment to double at a specific rate of return.Ĭalculating the rule of 72 is pretty simple. And knowing upfront about how long it will take to double your money is an easy way to gauge the value of an investment. Doubling your money may not be your primary goal when you make an investment, but it’s certainly a nice start. ![]()
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