Rule of 72

The "Rule of 72" states that to estimate how long it takes for an investment to double, you divide 72 by the annual interest rate; for example, if you invest at a 10% annual return, your money will double in roughly 7.2 years (72 divided by 10).


Example scenarios:
8% interest rate:
If you invest with an 8% annual return, your money would double in about 9 years (72 divided by 8).

12% interest rate:
At a 12% annual return, your investment would double in approximately 6 years (72 divided by 12).

5% interest rate:
With a 5% annual return, it would take roughly 14.4 years for your money to double (72 divided by 5).

Key points about the Rule of 72:

Simple calculation:
It's a quick and easy way to estimate how long it takes for an investment to double, without complex formulas.

Approximation:
While not perfectly accurate, the Rule of 72 is generally considered a reliable estimate for most interest rates.

Application to inflation:
You can also use the Rule of 72 to estimate how long it takes for the purchasing power of your money to halve due to inflation.