The Power Of Rule 72 & Compound Interest
The "Rule of 72" is a simple, quick and easy way to calculate the length of time in which money doubles at a certain interest rate. To find the length of time in which money doubles at 6%, divide 72 by 6 and you get 12 years. At 12% money doubles in 6 years. The following interest rate calculations (doubling) illustrates the impact of doubling at these different rates.
Below is an example of how you apply the rule of 72.
Compound Interest Example
Take the example as reference, using $10,000 as the initial investment principal. You will be able to see the return based on different interest rates after being compounded.
When you consider that mathematical factor and then make the necessary adjustments to the investable amount and the rate of growth adjusted for taxes on the investment you'll be well on your way to understanding the investment process; and be far better able to select the "correct" investment tax structure for your assets. i.e retirement plans, tax deferred investment accounts, charitable trusts and the like.
Here is an interesting website where you can learn the basic of investing.
