By Matthew Marcoux, CFP® / November 30th, 2020
Rule of 72
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.