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Explain the rule 72?

rule 72

rule 72

New York - A golden rule of investing is known as the Rule of 72. It is way to calculate how long it will take your investments to double in value.

If you divide the number 72 by the rate of return you expect to earn on your investments, you will find the number of years it will take for your investments to double. For example, if you are earning 7% per year, it will take about 10 years. If you are earning 14% it will take about five years.

You can use the same calculation to find the rate of return required to make your portfolio double. Just divide the number 72 by the number of years that you want the money doubled. For example, if you want your money doubled in 10 years, you will need a 7% percent return. 

One drawback to this calculation is that it does not take into account any additional money that you can or will invest over the years.



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