Hi, I saw this ‘Rule of 72’ and was wondering what it is? A bit confused with the many rules and ratios…? - Seedly
Seedly logo
Seedly logo
 

Fresh Graduates

Investments

Personal Finance 101

Anonymous

Asked 4d ago

Hi, I saw this ‘Rule of 72’ and was wondering what it is? A bit confused with the many rules and ratios…?

0 comments

1 answer

Answer Now

Answers (1)

Sort By

Hi Anon!

I totally understand… So many guidelines and rules and ratios… But I guess that could be a good thing too!

I like to view it as, we have more options to choose from, more choices in terms of these guidelines so we can see which one works best for us and tweak it accordingly!

Disclaimer: This is purely a guide for a rough estimation.

//

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest.

Your rate of return refers to the expected returns generated from your investment.

For example, if you invest in an index ETF with 6% rate of return

  • 72/6 = 12 years to double the amount invested

On the other hand if you invest in a bond with 3% rate of return

  • 72/3 = 24 years to double the amount invested

Not too difficult to use aye!

Here are a few other questions to ask yourself:

  • How much are you planning to invest?

  • How long is your investment horizon?

  • Which products are you looking to invest in?

If you’re keen on other guidelines, you can check out the 50-30-20 salary allocation guideline or the 5 percent rule of investing (which basically suggests that an investor allocate no more than 5 percent of their portfolio to one investment security).

Hope this helps! :)​​​

0 comments

👍
4
Thank You!
Can you clarify
I wonder if
This is so helpful 👍
What about
Post