Use this rule to quickly find out when your investments will double in value (2024)

When we put our money in the market, or before we even do, one of the biggest questions we have is: How long will it take for this investment to really grow?

Luckily, there's a mathematical shortcut to help you estimate the future value of an investment. The Rule of 72 is a quick way to figure out approximately the number of years needed to double your invested money.

Using your rate of return, the Rule of 72 is a simplified formula that measures the effect of compound interest on your investment dollars. As a refresher, compound interest is calculated on your principal amount, plus your accumulated interest. It essentially pays interest on top of interest and is a huge perk of investing in the market since your interest earned is automatically reinvested, earning you even more.

Subscribe to the Select Newsletter!

Our best selections in your inbox. Shopping recommendations that help upgrade your life, delivered weekly.Sign-up here.

How to calculate the Rule of 72

To use the Rule of 72 formula, simply divide 72 by the expected annual rate of return. Take note that the formula assumes the same rate over the life of the investment.

As an example, say you invest $50,000 in a mutual fund that has a hypothetical 6% average rate of return. By using the Rule of 72 formula, your calculation will look like this: 72/6 = 12. This tells you that, at a 6% annual rate of return, you can expect your investment to double in value — to be worth $100,000 — in roughly 12 years.

When calculating the Rule of 72 for any investment, note that the formula is an estimation tool and the years are approximate. The Rule of 72 mainly works with common rates of return that are in the range of 5% to 12%, with an 8% return as the benchmark of accuracy. Lower or higher rates outside of this range can be better predicted using an adjusted Rule of 71, 73 or 74, depending on how far they fall below or above the range. You generally add one to 72 for every three percentage point increase. So, a 15% rate of return would mean you use the Rule of 73.

Keep in mind that a mutual fund or index fund are smart investing options, especially for beginners, as it offers instant diversification by pooling money from many individuals to invest in a collection of companies. They also offer somewhat predictable returns over the long run. For instance, have returned about an 11% average annualized return since 1950, be it with significant downward and upward swings in some years.

Robo-advisors likeWealthfront,BettermentandSoFiwill build you a portfolio of index funds (usually in the form of ETFs) based on your risk tolerance, time horizon and investing goals.These are good platforms to use when you're just starting out investing since robo-advisors automatically rebalance your portfolio for you and as you get closer to your investing targets. If you want more control over your investments consider a brokerage that doesn't charge commission fees, like Charles Schwab or Fidelity.

Fidelity Investments

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go®account, but minimum $10 balance according to the investment strategy chosen

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over and this includes access to unlimited 1-on-1 coaching calls from a Fidelity advisor)

  • Bonus

    Find special offers here

  • Investment vehicles

    Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other:Fidelity Investments 529 College Savings; Fidelity HSA®

  • Investment options

    Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares

  • Educational resources

    Extensive tools and industry-leading, in-depth research from 20-plus independent providers

Terms apply.

Betterment

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For example, Betterment doesn't require clients to maintain a minimum investment account balance, but there is a ACH deposit minimum of $10. Premium Investing requires a $100,000 minimum balance.

  • Fees

    Fees may vary depending on the investment vehicle selected, account balances, etc. Click here for details.

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment offers retirement and other education materials

Terms apply. Does not apply to crypto asset portfolios.

The Rule of 72 and inflation

The Rule of 72 can also help you see how long it would take for the effect of inflation to cut your money in half.

As an example, say you have $100,000 and expect a hypothetical long-term inflation rate of 3%. Since inflation reduces your purchasing power over time, your $100,000, if not invested, would lose half its value (aka be worth $50,000) by 24 years. The calculation for this looks like: 72/3 = 24. If inflation increases from a rate of 3% to 6%, that same $100,000 would lose half its value even faster — in just 12 years (72/6 = 12).

Bottom line

The Rule of 72 is an easy way to quickly find out when your investments will double in value. It can also help you see how soon or far out inflation would eventually cut your money's value in half.

Catch up on Select's in-depth coverage ofpersonal finance,tech and tools,wellnessand more, and follow us onFacebook,InstagramandTwitterto stay up to date.

Read more

This is how much of your income should go toward investing, according to experts

Experts weigh in: Should you invest in one brokerage account or multiple?

Some stocks pay you just to hold them: Here's why you should invest in dividend growth stocks

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

Use this rule to quickly find out when your investments will double in value (2024)

FAQs

Use this rule to quickly find out when your investments will double in value? ›

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. Dividing 72 by the annual rate of return gives investors a rough estimate of how many years it will take for the initial investment to duplicate itself.

How do you calculate when an investment will double? ›

Here's how the Rule of 72 works. You take the number 72 and divide it by the investment's projected annual return. The result is the number of years, approximately, it'll take for your money to double.

How do you determine the doubling time of the investment? ›

It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

What is the Rule of 72 and the rule of 70? ›

The rule of 72 is best for annual interest rates. On the other hand, the rule of 70 is better for semi-annual compounding. For example, let's suppose you have an investment that has a 4% interest rate compounded semi-annually or twice a year. According to the rule of 72, you'll get 72 / 4 = 18 years.

What is the Rule of 72 100000? ›

By using the Rule of 72 formula, your calculation will look like this: 72/6 = 12. This tells you that, at a 6% annual rate of return, you can expect your investment to double in value — to be worth $100,000 — in roughly 12 years.

What is the Rule of 72 114 and 144? ›

Rules 72, 114, and 144 can be used to determine the period your investment can take to double, triple, and quadruple respectively. Follow the Minimum 10% Rule to get started with investing. Also, if you are beginning your investment journey, you might want to consider the Emergency Fund Rule.

What is the 8 4 3 rule of compounding? ›

The rule of 8-4-3 for mutual funds states that if you invest Rs 30,000 monthly into an SIP with a return of 12% per annum, then your portfolio will add Rs 50 lacs in the first 8 years, Rs 50 lacs in the next 4 years to become Rs 1 cr in total value and adds further Rs 50 lacs in the next 3 yrs to reach Rs 1.5 cr.

What is the rule of doubling time? ›

There is an important relationship between the percent growth rate and its doubling time known as “the rule of 70”: to estimate the doubling time for a steadily growing quantity, simply divide the number 70 by the percentage growth rate.

Why do we calculate doubling time? ›

Examining the doubling time can give a more intuitive sense of the long-term impact of growth than simply viewing the percentage growth rate.

Is the Rule of 72 a reliable way to estimate doubling time? ›

The Bottom Line

The rule of 72 can help you get a rough estimate of how long it will take you to double your money at a fixed annual interest rate. If you have an average rate of return and a current balance, you can project how long your investments will take to double.

What is Rule 69 and Rule 72? ›

Rules of 72, 69.3, and 69

The Rule of 72 states that by dividing 72 by the annual interest rate, you can estimate the number of years required for an investment to double. ● The Rule of 69.3 is a more accurate formula for higher interest rates and is calculated by dividing 69.3 by the interest rate.

What is the doubling rule of 70? ›

Definition and Examples of the Rule of 70

To calculate the doubling time, the investor would simply divide 70 by the annual rate of return. Here's an example: At a 4% growth rate, it would take 17.5 years for a portfolio to double (70/4) At a 7% growth rate, it would take 10 years to double (70/7)

How does the Rule of 72 apply to investing? ›

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. Dividing 72 by the annual rate of return gives investors a rough estimate of how many years it will take for the initial investment to duplicate itself.

What is the Rule of 72 how much to double your money with a 6% interest rate? ›

So, if the interest rate is 6%, you would divide 72 by 6 to get 12. This means that the investment will take about 12 years to double with a 6% fixed annual interest rate. This calculator flips the 72 rule and shows what interest rate you would need to double your investment in a set number of years.

What is the rule of 74? ›

Let's use 14% as an example: 14% is 6 points higher than 8%, so the recommendation for a more accurate approximation would be the rule of 74. The rule of 74 puts it at about 5.285 years, as opposed to the rule of 72 which would say 5.14 years.

What is the rule of 100 investments? ›

According to this principle, individuals should hold a percentage of stocks equal to 100 minus their age. So, for a typical 60-year-old, 40% of the portfolio should be equities. The rest would comprise high-grade bonds, government debt, and other relatively safe assets.

How long does it take a 5% investment to double? ›

It would take 14.4 years to double your money. Applying the rule of 72, the number of years to double your money is 72 divided by the annual interest rate in percentage. In this question, the annual percentage rate is 5%, thus the number of years to double your money is: 72 / 5 = 14.4.

How many years will it take for a 5% investment to double? ›

If the expected annual return on a CD is 5% and you invest the same amount, it will take you 14.4 years to double your money.

How long will it take for an investment to double in value if it earns 7% compounded continuously? ›

It takes 9.9 years for money to double if invested at 7% continuous interest. t=ln(2)/r where r was 0.07 in that solution.

How long will it take money to double if it is invested at 10%? ›

A 10% interest rate will double your investment in about 7 years (72 ∕ 10 = 7.2); an amount invested at a 12% interest rate will double in about 6 years (72 ∕ 12 = 6). Using the Rule of 72, you can easily determine how long it will take to double your money.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Tish Haag

Last Updated:

Views: 5479

Rating: 4.7 / 5 (47 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Tish Haag

Birthday: 1999-11-18

Address: 30256 Tara Expressway, Kutchburgh, VT 92892-0078

Phone: +4215847628708

Job: Internal Consulting Engineer

Hobby: Roller skating, Roller skating, Kayaking, Flying, Graffiti, Ghost hunting, scrapbook

Introduction: My name is Tish Haag, I am a excited, delightful, curious, beautiful, agreeable, enchanting, fancy person who loves writing and wants to share my knowledge and understanding with you.