Double Your Money Using the Rule of 72

The Rule of 72 is crucial in understanding how long it takes to double an investment

Photo by John McArthur on Unsplash

Before explaining what the rule of 72 is, lets first consider a couple of points:

• Wealth Building is all about the number of doubles.
• The rule of 72 is used to calculate the doubling time, that is how long does it take to double your money.

Rule of 72 Statement: The rule of 72 states that the time needed to double an investment is given as:

Consider the following examples:

• If the rate of return is 10%, it will take 72/10 = 7.2 years to double.
• If the rate of return is 7%, it will take 72/7 = 10.3 years to double.
• If the rate of return is 5%, it will take 72/5 = 14.4 years to double

A Case Study:

Let’s assume John and Peter are two investors. John invests in an S&P 500 index fund, and lets assume a return of 10%. Peter invests in a bond-index…