The Rule of 72

A mental shortcut to estimate the power of compound interest.

Growth Inputs

Initial Investment ($)

Expected Annual Return (%)

Historical S&P 500 is ~10%

Target Multiplier (Doubles)

Double (2x)1000x+

The Rule of 72 is a quick way to estimate compounding. At 8%, your money doubles every 9.0 years.

Time to 8x Your Money

27.0 Years

Resulting in $400,000

Compounding Timeline

Start

$50,000

9.0 yr

$100,000

Double #1

18.0 yr

$200,000

Double #2

27.0 yr

$400,000

Double #3

Doubling Time

9.0 Yrs

Growth Factor

What is the Rule of 72?

The Rule of 72 is a simple mathematical formula used to estimate the number of years required to double the invested money at a given annual rate of return. It is one of the most famous "rules of thumb" in finance.

The Formula

72 / Rate = Years

By dividing 72 by your annual interest rate, you get a remarkably close estimate of how many years it will take for your principal to double.

Why 72?

72 is chosen because it has many divisors (2, 3, 4, 6, 8, 9, 12) and because it provides a more accurate approximation for common interest rates (5-12%) than the natural log formula it simplifies.

The Magic of Multiple Doubles

Wealth isn't built in the first double, but in the third and fourth. If you start with $10,000, after one double you have $20,000. After four doubles, you have **$160,000**. This is why starting early is the most important factor in US stock market investing.

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