Want to double your money? The Rule of 72 is your quick and dirty shortcut to understanding investment growth. This simple formula estimates how long it will take for an investment to double, given a fixed annual rate of return.
Here's the magic: Divide 72 by the annual rate of return. The result is the approximate number of years it takes for your investment to double.
For example, an investment earning 8% annually will roughly double in 9 years (72 / 8 = 9). Conversely, if you want your money to double in 6 years, you need an annual return of approximately 12% (72 / 6 = 12).
Keep in mind this is an approximation, especially with fluctuating interest rates. But the Rule of 72 offers a valuable, easily memorized tool for quick investment comparisons and financial planning. So, next time you're evaluating an investment opportunity, remember the Rule of 72 – it's a simple way to see if your money is working hard enough for you!
