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The Rule of 72

This simple formula is commonly used to quickly estimate the number of years required to double the invested money at a given annual rate of return. It comes in handy for mental calculations to quickly gauge an approximate value.

Often used when comparing different investment options, the Rule of 72 is reasonably accurate for rates of return that fall in the range of 6% and 10%.

Here's how the Rule of 72 works: 

Take the number 72 and divide it by the investment's projected annual return. The result is the number of years, approximately, it will take for your money to double. For example, if your investment averages 8% return, it will take approximately 9 years to double (72 divided by 8 = 9).

You can also use the formula to calculate the average rate of return you will need to reach a financial goal within a certain timeframe. For example, if you have $10,000 now and you want it to grow to $20,000 in 10 years, you will need an average rate of return of 7.2% (72 divided by 10).

This article is provided for information purposes only. Although the content is believed to be reliable when posted, Stonebrooke Private Wealth Management Ltd. cannot guarantee this information is current, accurate or complete and does not assume any liability. The information is not intended to provide any insurance, financial, legal, accounting or taxation advice and should not under any circumstances be relied upon without consultation about your specific situation. The information is subject to modification and updating from time to time without notice.

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