The rule of 72 dates back before the 14th century and is a way to quickly calculate how long it will take to double your investment given a fixed rate of return and annual compounding.
72 / rate of return = years it takes to double your investment. Here’s an example:
If you had an investment that earned 9% per year, it would take you 8 years to double your money using the rule. (72 / 9 = 8 years)
The chart below shows different annual returns and how long it will take your investment to double in value:
Keep in mind this is just a rough guide. Inflation, taxes, fees, etc. aren’t factored into the Rule of 72. You should always calculate exact returns when performing due diligence on potential investments. Happy Investing!
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