Friends! the rule of 72 is a simple mathematical formula that you can use to measure the time, in terms of years, it will take to double your investment with any given annual rate of return. If you want to become a millionaire, this formula comes handy to find out the interest multiplier you need to reach the magic number – $1 Million within a certain time or the time you will need to reach your goal if you already know the annual rate of return your investment is expected to grow at!!
The formula runs like this. You divide number 72 with the annual rate of return you are expecting to receive. If you expect to receive 4% simple annual rate of return, then it will take you 18 years (72 divided by 4) to double your money, and 8 years with 9% simple annual rate of return (72 divided by 9).
The formula above is more accurate for measuring how long it will take to double your money for any given simple annual rate of return. I think by now you already know of an investor’s best friend aka(also known as) Compound Interest. If you have your best friend working for you, you can use the number 69 instead of 72 in order to find the time it will take to double your money. As your dividing a smaller number(69) than a higher number (72) in your formula to divide, it will take less time to double your money. So sooner you will become friends with the Compounding Interest and make it work for you, the earlier you will become a millionaire. If you haven’t yet read how the compounding interest can be your best friend on your way to become a millionaire, you can read here.