investing

6 financial formulas to help you succeed

Formula No. 6: How long to double your money
72 ÷ R (the annual interest rate of the investment) = Years to double investment

This "Rule of 72" helps you quickly compare the returns from different interest rates, taking into account the effect of compounding.

If you have a sum of money now, you can quickly estimate how much it will grow to be in the future. For example, if you take $10,000 and invest it at 5 percent, then this rule of thumb tells you it will take about 14.4 years to double your money.

"That helps people think about how long they'll need to work. It makes a good starting point for evaluating your current situation," says Golden.

Sachs cautions that there's a drawback to focusing on return: "What if you met your target return but not your financial goals?" He suggests deciding on your goals first and then building a portfolio that can meet those goals with the least amount of risk.

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