Quick Definition

The Rule of 72 is a simple formula used to estimate the number of years required to double an investment at a given annual fixed rate of return.

Formula

Examples

• 1If you invest $1,000 at an annual interest rate of 8%, it will take approximately 72 / 8 = 9 years to double your investment to $2,000.
• 2For a mutual fund with an average annual return of 12%, using the Rule of 72, it would take about 72 / 12 = 6 years for the initial investment to double.
• 3If a retirement account grows at an annual rate of 6%, the Rule of 72 suggests it will take 72 / 6 = 12 years for the funds to double.

Tags