Chuck Sears When reviewing investment strategies, I have always incorporated The Rule of 72 for a quick feel in compounding my return on investment (ROI). The Rule of 72 is a simple formula used to estimate how long it will take for an investment to double.
If your investment earns an 8% return, it will take approximately 9 years to double (72 ÷ 8 = 9). This rule is particularly accurate for interest rates between 6% and 10%.
The Rule of 72 can be leveraged in two different ways to determine a doubling period or rate of return.
To calculate the time period, divide the integer 72 by the expected rate of return. The formula relies on a single average rate over the life of the investment. The findings hold true for fractional results, as all decimals represent an additional portion of a year.
For different situations, it’s often better to use the Rule of 69, Rule of 70, or Rule of 73.
