Hello;
Have you ever wondered what it would take for your money to double?
What is the Rule of 72?
It is essentially a rule that can help you estimate how soon your investment will double based on an annual rate of return. To determine this, all you need to do is divide the number 72 by the annual rate of return. This will give you a rough idea of when your investment will be worth twice as much as it’s worth today. The table illustrates examples of various annual rates of returns and timeframes:
| Rate of Return | Approximate time to double with “The Rule of 72” |
| 3% | 24 years |
| 5% | 14.4 years |
| 7% | 10.3 years |
| 12% | 6 years |
| 25% | 2.9 years |
Based on this table, if you invest a one time sum of $5,000 that you don’t touch at a rate of return of 5%, it would take 14.4 years for your investment to double to $10,000.
Why does the Rule of 72 matter to you as an investor?
The rule of 72 is good to keep in mind because it can help you get a sense of how long it will take for your money to grow (or double) in order for you to meet a financial goal or objective that’s tied to a specific timeline. Knowing how long it could take can help you fine-tune your savings and investment strategies in order to achieve your financial goals.
Please let us know if you require additional information.
Sincerely,
Mike Busby (23-Feb-2021)
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