331- From the Vault: Rule of 72
b'The Rule of 72 is a simple equation to help you determine how long an investment will take to double, given a fixed interest rate.\\n\\nIt\\u2019s a shortcut that you, as an investor, can use to estimate if an investment will double your money quickly enough to be worth pursuing. When you see how quickly your money can double, you\\u2019ll understand the power of compound interest.\\xa0\\n\\nCompound interest is what makes you wealthy over time; the longer your money is invested, the more it grows. But, how?\\n\\nAs you earn interest on your initial investment, those earnings are added to the initial amount while earning interest. This produces more earnings, which can then be reinvested as well.\\xa0\\n\\nIt\\u2019s a powerful cycle that can lead to incredible growth. The Rule of 72 paints a picture of how quickly your money can grow without any additional investment on your part.\\xa0\\n\\nYou don\\u2019t need a special \\u2018Rule of 72\\u2019 calculator to figure out this equation \\u2014 it\\u2019s easy.\\xa0\\n\\nSimply divide 72 by the fixed annual rate of return and you\\u2019ll know how many years it will take for your money to double.\\xa0\\n72 / rate of return = # of years\\n\\nIf you\\u2019re trying to compute when your money will double at a given interest rate, this formula can be used to determine the interest rate you need your money to double in a set timeframe:\\xa0\\n72 / # of years = rate of return\\n\\nIn this vault episode of the InvestED podcast, Phil and Danielle discuss the Rule of 72 more in-depth and explain why it\\u2019s critical to understand this rule in order to be a great investor.\\n\\xa0\\nTopics discussed in this episode:\\n\\nRule of 72\\n\\nCompound interest\\n\\nHow to pick stocks\\n\\nHow to double your money\\n\\n\\xa0\\n\\xa0\\nLearn more about your ad choices. Visit megaphone.fm/adchoices'