Rule of 72 - CandorPath

Rule of 72

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By Matthew Marcoux, CFP® / November 30th, 2020

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Let’s talk about the rule of 72. It’s a term some of you may never have heard of, but it can be a quick and useful way to estimate the number of years it will take to double your return given a fixed rate. The hardest part is assuming what a fixed rate return should be. Here’s an example: You invest $100,000 at 6% per year, so it will take roughly 12 years to double your money. You can figure that out by dividing 72 by 6% to get 12.


 

There’s a multitude of factors that can disrupt this rough calculation, like adding money to your investments, the rate of return fluctuating based on the market, inflation, and so on. Still, it’s a quick and easy calculation to work from.

 

Comment below if you’ve ever heard of or used the rule of 72.