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Rule of 72

Rule of 72

June 20, 2022

The Rule of 72 is a simple and useful formula used to figure out the approximate time to double invested money at a given rate of return. You divide 72 by the rate of return and that will give you the approximate years to double your invested money. So, if you figure 8% per year, your money would double in 9 years (72/8=9). If you have a $1,000 earning 8% per year, it would be $2,000 in 9 years, $4,000 in 18 years and so on.

The Rule of 72 is good for an approximation, as the actual return will ultimately determine the outcome. Actual versus average returns will be discussed in another article. The Rule of 72 is a good place to start when estimating what your existing balance may grow to in the future.

The rule of 72 is a mathematical concept and does not guarantee investment results nor functions as a predictor of how an investment will perform. It is an approximation of the impact of a targeted rate of return. Investments are subject to fluctuating returns and there is no assurance that any investment will double in value.