Rule of 72
Mental shortcut for compound growth — divide 72 by your annual return rate to estimate years to double your money. Most accurate for rates from 6% to 10%.
Definition
The Rule of 72 is a mental approximation: divide 72 by the annual return rate (as a number, not percent) to get the years for an investment to double. It's most accurate for rates between 6% and 10%.
Variants: Rule of 70 (slightly more accurate at lower rates), Rule of 114 for tripling, Rule of 144 for quadrupling. The math behind it is ln(2) ≈ 0.693, multiplied by 100 ≈ 69; 72 is used because it's more divisible by common return rates.
Example
8% return → doubles in 72/8 = 9 years. 12% return → 6 years. 6% inflation → purchasing power halves in 12 years.
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