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The Rule of 72

Have you ever wondered how long it will take for your investment to double in value? The “Rule of 72” can help you get a rough estimate of how many years you can expect to wait. The formula is quite simple really. You simply divide the annual rate of return by 72 to get your number. For example, a $1 investment at a 10% rate of return will take 7.2 years to double (72/10=7.2). But as mentioned above, the rule should only be used to get a rough estimate. For the example above the exact number of years it would take for that investment to double would actually be 7.3 years, giving the Rule of 72 formula a .1 year margin of error. Below is a chart showing the differences in calculations using the Rule of 72 and the exact calculations. As you can see the accuracy is highest at 7%-9%.

Rule-of-72(click to enlarge)

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