Author Topic: Predicting investment's doubling time  (Read 5385 times)

payitoff

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Predicting investment's doubling time
« on: April 23, 2014, 01:13:13 PM »
Have you heard of Rule of 72?

The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.

is this true?  http://en.wikipedia.org/wiki/Rule_of_72

so a $50,000 will double in 9 years at 8% interest if you just leave it there and not add anymore to it.

alm0stk00l

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Re: Predicting investment's doubling time
« Reply #1 on: April 23, 2014, 01:15:36 PM »
Yes, it is true, pretty much. It isn't true to the exact dollar, but it gets you in the ballpark.

arebelspy

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Re: Predicting investment's doubling time
« Reply #2 on: April 23, 2014, 01:25:43 PM »
Yeah.  I use it quite frequently when getting a ballpark amount, for example to evaluate a claim of doubling in 10 years.  It's less accurate at the edge cases (very high or very low interest rates/years).
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BrianT

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Re: Predicting investment's doubling time
« Reply #3 on: April 23, 2014, 01:40:43 PM »
The rule works as far as I can tell. My 401k ended up a little more than doubling after 10 years when investing index funds. This rule also gave me a peace of mind for when I hit 60 years old - I know my 401k will be enough to take care of me even if I choose not to contribute anymore (not that I've stopped, but knowing this keeps me at ease).

warfreak2

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Re: Predicting investment's doubling time
« Reply #4 on: April 23, 2014, 01:43:25 PM »
It's a small-number approximation based on ln(1+x) ≈ x. It will be reasonably accurate for percentages like 0-10%, but at 100%, the time to double is exactly 1 year, not 72/100 of a year.

BrianT

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Re: Predicting investment's doubling time
« Reply #5 on: April 23, 2014, 02:56:56 PM »
It's a small-number approximation based on ln(1+x) ≈ x. It will be reasonably accurate for percentages like 0-10%, but at 100%, the time to double is exactly 1 year, not 72/100 of a year.
Good to know

zurich78

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Re: Predicting investment's doubling time
« Reply #6 on: April 23, 2014, 04:27:28 PM »
Have you heard of Rule of 72?

The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.

is this true?  http://en.wikipedia.org/wiki/Rule_of_72

so a $50,000 will double in 9 years at 8% interest if you just leave it there and not add anymore to it.

Somebody was watching The Suze Orman show recently!

AlmstRtrd

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Re: Predicting investment's doubling time
« Reply #7 on: April 23, 2014, 05:26:32 PM »
The rule of 72 is great for quick calculations of doubling time. Some people use the number 70 but 72 is more practical because it has so many factors.

payitoff

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Re: Predicting investment's doubling time
« Reply #8 on: April 23, 2014, 06:05:35 PM »
Have you heard of Rule of 72?

The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.

is this true?  http://en.wikipedia.org/wiki/Rule_of_72

so a $50,000 will double in 9 years at 8% interest if you just leave it there and not add anymore to it.

Somebody was watching The Suze Orman show recently!

oh is this her idea? i dont watch her shows, she kinda annoys me how she scolds her callers lol  i saw this in one of the PF blogs i am reading... this is good information though

warfreak2

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Re: Predicting investment's doubling time
« Reply #9 on: April 23, 2014, 06:23:41 PM »
oh is this her idea? i dont watch her shows, she kinda annoys me how she scolds her callers lol  i saw this in one of the PF blogs i am reading... this is good information though
Not unless she was an Italian mathematician in the 15th century. Generally, any maths appropriate for high school was discovered by someone who died before there were calculators.

arebelspy

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Re: Predicting investment's doubling time
« Reply #10 on: April 23, 2014, 06:28:05 PM »
oh is this her idea? i dont watch her shows, she kinda annoys me how she scolds her callers lol  i saw this in one of the PF blogs i am reading... this is good information though
Not unless she was an Italian mathematician in the 15th century. Generally, any maths appropriate for high school was discovered by someone who died before there were calculators.

I wouldn't rule it out, based on her age.
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DoubleDown

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Re: Predicting investment's doubling time
« Reply #11 on: April 23, 2014, 06:59:15 PM »
oh is this her idea? i dont watch her shows, she kinda annoys me how she scolds her callers lol  i saw this in one of the PF blogs i am reading... this is good information though
Not unless she was an Italian mathematician in the 15th century. Generally, any maths appropriate for high school was discovered by someone who died before there were calculators.

I wouldn't rule it out, based on her age.

Haha, good one! If there was a Suze Orman Rule of 72, it would be "Don't even THINK about retiring until you're at least 72, or have $72 million in cash!"

arebelspy

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Re: Predicting investment's doubling time
« Reply #12 on: April 23, 2014, 07:17:10 PM »
If there was a Suze Orman Rule of 72, it would be "Don't even THINK about retiring until you're at least 72, or have $72 million in cash!"

ZING!  Well played.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

 

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