Rule 72
‘Rule of 72’ is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself. The chart below give you a quick overview of how this works.
Invest $1,000 at:
| Time | 3% | 6% | 12% |
|---|---|---|---|
| 6 years | $ – | $ – | $ 2,000.00 |
| 12 years | $ – | $ 2,000.00 | $ 4,000.00 |
| 24 years | $ 2,000.00 | $ 4,000.00 | $ 16,000.00 |
| 48 years | $ 4,000.00 | $ 16,000.00 | $ 256,000.00 |
*These examples are hypothetical and for illustrative purposes only. The rates of return do not represent any actual investment and cannot be guaranteed. Any investment involves potential loss of principal. The rule of 72 is a mathematical concept and does not guarantee investments results nor functions as a predictor of how investment will perform. It is an approximation of the impact of a targeted rate of return. Investments are subject to fluctuating returns and there is no assurance that any investment will double in value.
