# The Rule of 72: Definition, Usefulness, and How to Use It.

. The Rule of 72: What It Is, Why It's Useful, and How to Use It. What's the Rule of 72 in finance? The Rule of 72 is a simple way to calculate how long it will take for an investment to double, given a fixed annual rate of return. To use the Rule of 72, simply divide 72 by the annual rate of return. The resulting number is the number of years it will take for the investment to double.

For example, if an investment is expected to return 8% annually, it will take 9 years for it to double (72/8 = 9).

The Rule of 72 can be used for any type of investment, including stocks, bonds, mutual funds, and real estate. It is a helpful tool for investors to use when considering different investment options.

It's important to note that the Rule of 72 is only a guideline, and is not a guarantee of how long it will take for an investment to double. Investment return rates can fluctuate, so there is always some risk involved.

### Does Rule of 72 include inflation?

The Rule of 72 is a simple way to estimate how long it will take an investment to double, given a constant rate of return. The rule states that you simply divide 72 by the annual rate of return to get the approximate number of years it will take for the investment to double.

The Rule of 72 does not include inflation in its calculations. Inflation is the rate at which prices for goods and services rise over time.

If you are trying to estimate how long it will take for your investment to keep up with inflation, you need to account for inflation in your calculations. To do this, you can divide 72 by the rate of inflation. This will give you an estimate of how many years it will take for your investment to double in value, after adjusting for inflation.

Where does the Rule of 72 come from? The Rule of 72 is a simple way to calculate how long it will take for an investment to double, based on its compound annual growth rate. To use the rule, simply divide 72 by the compound annual growth rate of the investment. For example, if an investment is expected to grow at a rate of 8% per year, it would take 72/8, or 9 years, for it to double.

The Rule of 72 is a useful tool for estimating how long it will take for an investment to grow, but it is important to remember that it is only an estimate. Actual results may vary depending on a number of factors, including the actual compound annual growth rate of the investment.

#### How do you teach the Rule of 72?

The Rule of 72 is a simple way to determine how long it will take for an investment to double, given a fixed annual rate of return. To use the Rule of 72, divide 72 by the annual rate of return you expect to earn on your investment. The resulting number is the approximate number of years it will take for your investment to double.

For example, if you expect to earn an 8% annual return on your investment, it will take approximately 9 years for your investment to double (72/8 = 9).

The Rule of 72 is a useful tool for estimating how long it will take to achieve financial goals, such as saving for retirement or college. However, it is important to remember that the Rule of 72 is just an estimate and your actual results may vary.

##### What are the keys to building wealth through investments?

The keys to building wealth through investments are patience, diversification, and discipline.

Patience is important because it takes time for investments to grow. Diversification is important because it helps to spread the risk of investing and reduces the likelihood of losing money. Discipline is important because it helps to keep investors on track and helps to prevent them from making impulsive decisions that can lead to losses.