When it comes to investments, the more you know, the more you grow. Indeed in the business world, knowledge is the key to power. Comprehending the multiple facets of an investment can be the difference between a loss and a profit. Ian Mausner believes that there are many ways to make money in investments; one particular strategy that has been gaining popularity in recent years is Rule 72.
Rule 72 –
Rule 72 is a strategy that enables an investor to calculate the number of years it will take for their investment to double at a given interest rate. This simple rule can apply to any investment, including stocks, bonds, and cryptocurrency.
To put it simply, Rule 72 states:
“To find the number of years required to double your money at a given interest rate, divide 72 by the interest rate.”
For example, if you are earning a 10% annual return on your investment, it would take approximately 7.2 years (72/10) for your money to double. However, if you only earn a 5% return, it would take approximately 14.4 years for your money to double.
Why Is Rule 72 Important?
Rule 72 is an essential tool for investors because it provides a straightforward way to think about the long-term effects of compound interest. In other words, it can help you understand how your investment will grow over time.
Compound interest is often referred to as the “miracle of compounding” because it has the ability to turn a small sum of money into a large fortune over time. The key is to invest early and let compound interest work its magic.
Imagine that you invest $10,000 at a 10% annual return. After one year, your investment will be worth $11,000.
At the end of the second year, your investment will be worth $12,100. ($11,000 x 1.1 = $12,100)
At the end of the third year, your investment will be worth $13,310. ($12,100 x 1.1 = $13,310)
As you can see, each year, your investment grows by 10%, but the actual dollar amount increases by a larger and larger amount because it is multiplied by an ever-increasing number. This is the power of compounding.
The earlier you start investing, the more time compound interest has to work magic. This is why it’s so important to start investing as early as possible.
Rule 72 can help you understand how long it will take for your investment to double, which can be a helpful way to think about the long-term effects of compound interest.
Why Use Rule 72?
Rule 72 can be used in various situations, but it is most commonly used as a tool to help businesses and individuals save money on their taxes. When used correctly, Rule 72 can help you keep more of your hard-earned money in your pocket and out of the hands of the IRS.
There are a few different ways to use Rule 72 to your advantage, but the most common way is by using it to defer taxes on the income you have not yet earned. This means that you can put off paying taxes on income that you expect to receive in the future, such as from investments or other types of earnings.
The Bottom Line
Ian Mausner believes that rule 72 is a simple way to calculate how long it will take for your money to double at a given interest rate. It’s a helpful tool for investors because it provides a straightforward way to think about the long-term effects of compound interest.