Portfolio
Rule of 72
The Rule of 72 turns compounding math into simple arithmetic. Divide 72 by the annual percentage return and the result approximates the number of years needed to double your money.
At an 8% return, for example, an investment doubles in roughly nine years. The rule works in reverse too: divide 72 by the years you have, and you get the return needed to double in that time.
While only an approximation, the rule is accurate enough for quick planning and vividly illustrates how higher returns dramatically shorten doubling time.
Example
Using the Rule of 72, an investment earning 6% a year will take about 12 years to double.
Rule of 72 — FAQ
What is Rule of 72?
The Rule of 72 is a quick mental shortcut for estimating how many years it takes an investment to double, found by dividing 72 by the annual rate of return.
Can you give an example of Rule of 72?
Using the Rule of 72, an investment earning 6% a year will take about 12 years to double.
Understanding creates conviction.
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