The Rule of 72

Calculating your return is easy but determining what your investments might be worth at some time in the future can be more difficult. An easy way to determine the effect different rates of return will have on your investments is the Rule of 72.

The equation is easy: Simply divide the interest rate into 72; the result is how many years it will take an investment to double. For example, say you will earn 10% per year; in 7.2 years your money will have doubled. If you only earn 6%, it will take 12 years for your money to double.

Remember the Rule of 72 is based on achieving a predictable rate of return… but it can highlight the difference between various types of investments.