written by reader 72 – The Rule of 72

by SoGiAm | April 10, 2016 8:43 am

Rule Of 72 according to Investopedia:
What is the ’Rule Of 72’
The rule of 72 is a shortcut to estimate the number of years required to double your money at a given annual rate of return. The rule states that you divide the rate, expressed as a percentage, into 72:

Years required to double investment = 72 ÷ compound annual interest rate

Note that a compound annual return of 8% is plugged into this equation as 8, not 0.08, giving a result of 9 years (not 900).

Next Up
COMPOUND INTEREST
ANNUAL PERCENTAGE YIELD – APY
COMPOUNDING
RETURN
BREAKING DOWN ’Rule Of 72’
The rule of 72 is a useful shortcut, since the equations related to compound interest are too complicated for most people to do without a calculator. To find out exactly how long it would take to double an investment that returns 8% annually, one would have to use this equation:

T = ln(2)/ln(1.08)=9.006

Most people cannot do logarithmic functions in their heads, but they can do 72 ÷ 8 and get almost the same result. Conveniently, 72 is divisible by 2, 3, 4, 6, 8, 9, and 12, making the calculation even simpler.

The rule can also be used to find the amount of time it takes for money’s value to halve due to inflation. If inflation is 6%, then a given amount of money will be worth half as much in 72 ÷ 6 = 12 years. Nor does the unit have to be money: the rule could apply to population, for example.

Adjusting For Higher Rates
The rule of 72 is reasonably accurate for interest rates between 6% and 10%. When dealing with rates outside this range, the rule can be adjusted by adding or subtracting 1 from 72 for every 3 points the interest rate diverges from 8%. So for 11% annual compounding interest, the rule of 73 is more appropriate; for 14%, it would be the rule of 74; for 5%, the rule of 71.

For example, say you have a 22% rate of return (congratulations). The rule of 72 says the initial investment will double in 3.27 years. Since 22 – 8 is 14, and 14 ÷ 3 is 4.67 ≈ 5, the adjusted rule would use 72 + 5 = 77 for the numerator. This gives a return of 3.5, meaning you’ll have to wait another quarter to double your money. The period given by the logarithmic equation is 3.49, so the adjusted rule is more accurate.

Adjusting For Continuous Compounding
For daily or continuous compounding, using 69.3 in the numerator gives a more accurate result. Some people adjust this to 69 or 70 for simplicity’s sake.
Source:
http://www.investopedia.com/terms/r/ruleof72.asp?utm_term=rule+of+72&utm_content=sem-unp&utm_medium=organic&utm_source=&utm_campaign=&ad=&an=&am=&o=40186&askid=&l=dir&qsrc=999&qo=investopediaSiteSearch[1]

I encourage all to invest in dividend stocks; the sooner the better.
This discussion is created to discover and share their due diligence of those equities. Best2All-Ben

Endnotes:
  1. http://www.investopedia.com/terms/r/ruleof72.asp?utm_term=rule+of+72&utm_content=sem-unp&utm_medium=organic&utm_source=&utm_campaign=&ad=&an=&am=&o=40186&askid=&l=dir&qsrc=999&qo=investopediaSiteSearch: http://www.investopedia.com/terms/r/ruleof72.asp?utm_term=rule+of+72&utm_content=sem-unp&utm_medium=organic&utm_source=&utm_campaign=&ad=&an=&am=&o=40186&askid=&l=dir&qsrc=999&qo=investopediaSiteSearch

Source URL: https://www.stockgumshoe.com/2016/04/microblog-72-the-rule-of-72/


52 responses to “written by reader 72 – The Rule of 72”

  1. SoGiAm says:

    3 Growth Rockets tease from Dividend Channel ~ Think-o-later food: https://contrarianoutlook.com/exposed-retirement-crisis/DC082816B
    Crisis Ahead: Three dividend growers for 12% income and 200% gains, Brett Owens, Hidden Yields

  2. SoGiAm says:

    $MPW – I like the deal that Medical Properties Trust (MPW) did this week — thought he market was less enthused… http://www.stockgumshoe.com/2016/09/hospital-growth-continues/ ~ Travis

  3. SoGiAm says:

    @Tipranks – Creating a Dividend Investment Strategy Got Easier – 7 Strong Buys to Boost Your Dividend #Investment Strategy http://blog.tipranks.com/2016/10/investors-seek-dividend-income-strategy/

  4. SoGiAm says:

    $Holdings – Author:LongOnLife – I’ve reduced my holdings in S&P500 ETFs and increased proportionately my holdings of international and emerging markets ETFs. I am heavy in quality income producing stocks and REITs…. https://www.stockgumshoe.com/2017/09/cisco-chang-charlie-part-3/comment-page-6/#comment-4953317

  5. SoGiAm says:

    Each week at #DividendChannel, we screen through our coverage universe of dividend paying stocks, and we look at a variety of data — dividend yield, book value, quarterly earnings — and compare it to the stock’s trading data to come up with certain calculations about profitability and about the stock’s valuation (whether we think it looks ”cheap” or ”expensive”)…. 010618
    Long #Gr8Gummunity! #Sharing&Caring #Best2ALL! #InvestInYOU

    #ChildPrayer: https://www.youtube.com/watch?v=bse5TtEuaGk

    #BusinessSERVICES&EQUIPMENT
    DividendRank Symbol Dividend Recent Yield*
    #1 MIC Q 5.68 8.72%
    #2 NEWT Q 1.76 9.71%
    #3 WU Q 0.70 3.60%
    #4 TRTN Q 1.80 4.64%
    #5 NLSN Q 1.36 3.80%
    #6 BGSF Q 1.00 6.37%
    #7 BBSI Q 1.00 1.59%
    #8 MGRC Q 1.04 2.13%
    #9 PAYX Q 2.00 2.91%
    #10 RHI Q 0.96 1.72%

    #CONSTRUCTION
    DividendRank Symbol Dividend Recent Yield*
    #1 CAT Q 3.12 1.96%
    #2 HEES Q 1.10 2.81%
    #3 AGX A 1.00 2.21%
    #4 KBR Q 0.32 1.59%
    #5 PRIM Q 0.24 0.89%
    #6 RAIL Q 0.36 2.18%
    #7 FLR Q 0.84 1.58%
    #8 PHM Q 0.36 1.07%
    #9 GVA Q 0.52 0.80%
    #10 FIX Q 0.30 0.70%

    #ConsumerGOODS
    DividendRank Symbol Dividend Recent Yield*
    #1 BGFV Q 0.60 8.28%
    #2 GME Q 1.52 8.30%
    #3 CATO Q 1.32 9.94%
    #4 ODP Q 0.10 2.98%
    #5 NHTC Q 0.48 3.19%
    #6 CODI Q 1.44 8.21%
    #7 MTEX Q 0.50 3.50%
    #8 BGS Q 1.86 5.37%
    #9 BKS Q 0.60 9.24%
    #10 CVS Q 2.00 2.67%

    #ConsumerServices
    DividendRank Symbol Dividend Recent Yield*
    #1 TAX Q 0.64 5.64%
    #2 CPLA Q 1.72 2.19%
    #3 SCI Q 0.60 1.59%
    #4 CLCT Q 1.40 4.91%
    #5 MNRO Q 0.72 1.25%
    #6 NTRI Q 0.70 1.39%
    #7 CSV Q 0.30 1.14%
    #8 STRA Q 1.00 1.10%
    #9 GHC Q 5.08 0.90%

    #ENERGY
    DividendRank Symbol Dividend Recent Yield*
    #1 DLNG Q 1.69 13.62%
    #2 ETP Q 2.26 12.01%
    #3 SNMP Q 1.80 14.37%
    #4 ENB Q 2.68 6.57%
    #5 SEP Q 2.90 6.86%
    #6 KNOP Q 2.08 9.55%
    #7 ENBL Q 1.27 8.55%
    #8 SUN Q 3.30 11.40%
    #9 SDLP Q 0.40 10.11%
    #10 NNA Q 0.20 17.70%

    #FINANCIAL
    DividendRank Symbol Dividend Recent Yield*
    #1 HCAP M 1.35 12.04%
    #2 SAR Q 1.96 8.70%
    #3 SCM M 1.36 10.73%
    #4 ACSF M 1.16 10.70%
    #5 BSBR Q 0.81 8.00%
    #6 CEN M 1.25 11.81%
    #7 GECC M 1.00 9.82%
    #8 WHF Q 1.42 10.75%
    #9 EDI M 1.81 11.43%
    #10 ECC M 2.40 12.45%

    #HEALTHCARE
    DividendRank Symbol Dividend Recent Yield*
    #1 DRAD Q 0.22 8.39%
    #2 AMGN Q 5.28 2.95%
    #3 PFE Q 1.36 3.70%
    #4 OMI Q 1.03 5.36%
    #5 GILD Q 2.08 2.82%
    #6 KEQU Q 0.68 2.39%
    #7 JNJ Q 3.36 2.40%
    #8 PDCO Q 1.04 2.78%
    #9 MDT Q 1.84 2.19%
    #10 ABBV Q 2.84 2.86%

    #INDUSTRIAL
    DividendRank Symbol Dividend Recent Yield*
    #1 AYR Q 1.12 4.74%
    #2 TGLS Q 0.56 7.32%
    #3 HIHO Q 0.24 5.62%
    #4 UG S 1.00 5.40%
    #5 WSO Q 5.00 2.94%
    #6 LYB Q 3.60 3.20%
    #7 WLKP Q 1.50 6.05%
    #8 RPM Q 1.28 2.45%
    #9 APD Q 3.80 2.28%
    #10 CPAC A 0.54 4.36%

    #MANUFACTURING
    DividendRank Symbol Dividend Recent Yield*
    #1 UFAB Q 0.60 7.48%
    #2 IEP Q 6.00 10.72%
    #3 CSCO Q 1.16 2.98%
    #4 PCAR Q 1.00 1.34%
    #5 LEG Q 1.44 3.02%
    #6 HBI Q 0.60 2.83%
    #7 VFC Q 1.84 2.44%
    #8 MLR Q 0.72 2.80%
    #9 CMI Q 4.32 2.38%
    #10 QCOM Q 2.28 3.46%

    #MATERIALS
    DividendRank Symbol Dividend Recent Yield*
    #1 EVA Q 2.46 8.82%
    #2 SWM Q 1.72 3.75%
    #3 ICL Q 0.18 4.32%
    #4 UFS Q 1.66 3.31%
    #5 EMN Q 2.24 2.33%
    #6 GPRE Q 0.48 2.85%
    #7 MERC Q 0.50 3.55%
    #8 NWL Q 0.92 2.87%
    #9 IP Q 1.90 3.09%
    #10 PKG Q 2.52 1.97%

    #MEDIA
    DividendRank Symbol Dividend Recent Yield*
    #1 AHC Q 0.32 6.67%
    #2 SGA Q 1.20 2.93%
    #3 NEWM Q 1.48 8.92%
    #4 EVC Q 0.20 2.78%
    #5 IPG Q 0.72 3.57%
    #6 GCI Q 0.64 5.73%
    #7 LKSD Q 1.00 6.90%
    #8 SJR M 1.18 5.14%
    #9 SALM Q 0.26 5.91%
    #10 OMC Q 2.40 3.38%

    #METALS&MINING
    DividendRank Symbol Dividend Recent Yield*
    #1 SXCP Q 2.38 13.50%
    #2 MSB Q 2.56 9.25%
    #3 CCJ Q 0.40 4.09%
    #4 CMP Q 2.88 3.84%
    #5 CINR Q 2.27 8.73%
    #6 RIO S 2.20 4.02%
    #7 FELP Q 0.24 5.54%
    #8 BHP S 1.72 3.60%
    #9 WOR Q 0.84 1.87%
    #10 NRP Q 1.80 6.23%

    #RealEstate
    DividendRank Symbol Dividend Recent Yield*
    #1 MTGE Q 2.00 11.05%
    #2 CLNS Q 1.08 9.84%
    #3 ACRE Q 1.08 8.61%
    #4 NRZ Q 2.00 11.29%
    #5 MITT Q 1.90 10.31%
    #6 GMRE Q 0.80 9.53%
    #7 ARI Q 1.84 10.06%
    #8 AJX Q 1.20 8.65%
    #9 ORC M 1.68 18.42%
    #10 ABR Q 0.76 8.89%

    #TECHNOLOGY
    DividendRank Symbol Dividend Recent Yield*
    #1 TSM A 1.16 2.80%
    #2 TAIT Q 0.10 6.02%
    #3 NYLD Q 1.15 6.10%
    #4 QTRH Q 0.05 2.58%
    #5 XRX Q 1.00 3.37%
    #6 CSPI Q 0.44 3.04%
    #7 BBOX Q 0.48 12.89%
    #8 ETN Q 2.40 2.98%
    #9 CCUR Q 0.48 8.18%
    #10 MGIC S 0.26 2.90%

    #TRANSPORTATION
    DividendRank Symbol Dividend Recent Yield*
    #1 NAP Q 1.69 17.29%
    #2 GLOP Q 2.07 8.17%
    #3 GMLP Q 2.31 9.94%
    #4 PAC Q 5.96 5.60%
    #5 HMLP Q 1.72 8.83%
    #6 FTAI Q 1.32 6.60%
    #7 USDP Q 1.38 11.75%
    #8 OMAB Q 6.74 15.48%
    #9 SSW Q 0.50 7.01%
    #10 MATX Q 0.80 2.69%

    #TRAVEL&ENTERTAINMENT
    DividendRank Symbol Dividend Recent Yield*
    #1 AMC Q 0.80 5.54%
    #2 CBRL Q 4.80 2.93%
    #3 RCL Q 2.40 1.96%
    #4 LVS Q 2.92 4.29%
    #5 STAY Q 0.84 4.39%
    #6 CUK Q 1.80 2.70%
    #7 CCL Q 1.80 2.70%
    #8 DRI Q 2.52 2.56%
    #9 WYN Q 2.32 2.01%
    #10 CNK Q 1.16 3.42%

    #UTILITIES
    DividendRank Symbol Dividend Recent Yield*
    #1 DTV Q 3.25 6.10%
    #2 AES Q 0.52 4.81%
    #3 EIX Q 2.42 3.89%
    #4 OGE Q 1.33 4.08%
    #5 CTL Q 2.16 12.73%
    #6 PEGI Q 1.69 7.84%
    #7 TEO S 2.44 6.46%
    #8 GNE Q 0.30 6.63%
    #9 PNW Q 2.78 3.37%
    #10 CNSL Q 1.55 12.01%

    *(updated 13 hours, 2 minutes ago) Yield calculations vary and may not be reliable nor comparable. Not all publicly traded securities are ranked; data may be incorrect or out of date. Rankings are for informational purposes only and do not constitute advice. Full disclaimer

  6. SoGiAm says:

    BAYERISCHE MOTOREN WERKE (BMW) – A Global Leading Car Maker With EV/EBITDA Ratios Below 3 http://long-term-investments.blogspot.com/2018/02/bayerische-motoren-werke-bmw-global.html?

  7. SoGiAm says:

    $LSE.CARDC np – #SpecialDividend in September 2018
    * CARD FACTORY: British greeting card retailer Card Factory Plc
    reported on Tuesday a 6 percent increase in annual revenue as like-for-like
    sales increased and said it planned to declare a special dividend in September.
    [nL3N1RN2PB]
    /RGFMN$0798833b.html IB 20180410

  8. SoGiAm says:

    “The greatest shortcoming of the human race is our inability to understand the exponential function.” —Albert Bartlett

    How to double your money in the market

    https://youtu.be/I-cl__IRjYA

    Again and again 🙂 #exponential

    ht https://twitter.com/Gautam__Baid/status/1132162130801618945

    #Best2You!

  9. SoGiAm says:

    The Intelligent Investing Podcast 45:15
    #55: The Joys Of Compounding; Gautam Baid
    https://ericschleien.com/podcast/gautam-baid-the-joys-of-compounding/

    https://www.thejoysofcompounding.com/podcasts/

  10. SoGiAm says:

    $SPRT > Support.com declares $1.00 dividend
    Dec. 6, 2019 5:03 PM ET|About: Support.com, Inc. (SPRT)|By: Akanksha Bakshi, SA News Editor
    Support.com (NASDAQ:SPRT) declares $1.00/share special dividend.

    Payable Dec. 26; for shareholders of record Dec. 17; ex-div Dec. 16.
    https://seekingalpha.com/news/3524578-support-com-declares-1_00-dividend
    Merry Christmas! Best!

  11. lottifab says:

    Hi Travis
    I found this old post randomly…
    I just wondered what do you think about Dividend investing particularly, and why I couldn’t find the DIVIDEND KINGS among the huge list of newsletter reviews… Strange, is there a reason for this? I thought it was basically a complete enciclopedie of a kind about newsletters..
    thanks

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