Quote:
Originally Posted by tvbound
The "Rule of 72" doesn't really have anything to do with this thread subject, given that it is just a simple way to determine how long an investment will take to double, given an "estimated" fixed annual rate of interest. The key being that it relies on a variable, the expected ROR, to derive the number of years for that doubling and as can be seen by the gyrations of all of the markets recently - no one really knows what that variable will actually be.
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Not just interest is taken into account.
If the stock market on average goes up say 8% a year for the past 50 years and lets say you want to have a million dollars in investments by the time you retire in 30 years it gives you an idea of how much you need to put into investments each year.
Of course in the short run the results will vary greatly.
It is a very handy tool.