Rule 72

When calculating the required time, divide the corresponding figure with the applied rule by the expected growth rate. E.g:

Assume that the initial investment amount is 100 yuan and the annual interest rate is 9%. Using 72 rules, 72 is divided by 9 (the growth rate), which is 8, it takes about 8 years, and the investment amount is rolled to 200 yuan (twice) At 100 yuan), the exact time required is 8.0432 years.

To estimate the time required to halve the purchasing power of money, divide the number corresponding to the applied law by the inflation rate. If the inflation rate is 3.5%, applying the “70 rule”, the halving of purchasing power per unit of currency is about 70÷3.5=20 years.

What is good about this formula is that it can be used as a pusher. For example, using an investment tool with 5% annual return rate, the principal will be doubled after 14.4 years (72÷5); with 12% of the investment tools, It takes about six years (72÷12) to make a dollar into two dollars. Therefore, today if you have 1 million yuan in your hands and use an investment tool with a 15% return rate, you can quickly know that after about 4.8 years, your 1 million yuan will become 2 million yuan. Although the use of the 72 rule is not as accurate as looking up at the table, it is already very close, so when you have a compound list lost, remembering the simple 72 rule may help you a lot. The 72 rule can also be used to calculate the depreciation rate. For example, if the inflation rate is 3%, then 72÷3=24. After 24 years, your current one dollar can only buy fifty cents.

Example 1: A company's average annual revenue growth rate is 20%. Then how many years will it take for companies to achieve the goal of doubling their annual revenue?

Answer: 72÷20=3.6 years

Example 2: The average annual income of a company has tripled in 9 years. What is the average annual revenue growth rate in 9 years?

A: The 9-year financial income has tripled, which means that the average company doubles in 3 years, then the average annual revenue growth rate is: 72÷3=24, that is, the average annual financial revenue growth rate is 24%.

When we are doing financial planning, it is important to understand the operation and calculation of compound interest. We often like to use "benevolence" to describe an investment that is profitable and rewarding. Let's take 10,000 yuan, for example, to buy stocks with an annual return of 20%. If all goes well, it will take about three and a half years and 10,000 yuan. Yuan will become 20,000 yuan. Compounding the time multiplier effect is even more of a mystery. To spread the formula of compound interest, the "times" time factor of "benefits and principal = (1 + interest rate) number of periods" is the key factor of the entire formula, year after year (or January) Multiplied by the land, of course, the value will increase. Although the formula of compound interest is not difficult to understand, if it is a large number of periods, it is still quite troublesome. Therefore, there are many financial books available on the market, and all of them contain compound interest tables. Investors can easily calculate the information by looking at the table. However, although the compound list is easy to use, it cannot always be taken with you. If you need to calculate the compound interest, you have a simple “72 rule” that can be used as a trick.

The so-called “72 Rule” means that interest is calculated on a compound interest of 1%. After 72 years, your principal will be doubled. What makes this formula a good thing is that it can be used as a pusher. For example: using an investment tool with 5% annual return rate, the principal will be doubled after 14.4 years (72/5); with 12% of the investment tools, It takes about 6 years (72/12) to make 1 dollar into 2 dollars. Therefore, today if you have 1 million yuan in your hands and use an investment tool with a 15% return rate, you can quickly know that after about 4.8 years, your 1 million yuan will become 2 million yuan.

Although the use of the 72 rule is not as accurate as looking up at the table, it is already very close, so when you have a compound list lost, remembering the simple 72 rule may help you a lot.