As you all know, I am addicted to investing. I love seeking out new investment opportunities, and I really love seeing my returns! I mean, who wouldn’t want to see money make more money? Calculating returns can be a pretty exciting experience. Returns are typically measured in percentages and they are calculated with the ROI formula. If you do not know what that is, check out my article here. Anyway, once a numerical annual return is identified, it is possible to calculate when your investment will double. Want to know something else? It is easy to calculate as well! Using the Rule of 72, you can calculate when your investment will double in just a couple of minutes. Check it out below!
The Rule of 72 In Action
The rule of 72 calculates how long an investment will take to double based on your annual return. The formula is 72 divided by your annual return. Yes, it is that simple. For example, let’s say my annual return is 8%. Based on the rule of 72, it will take my investment 9 years to double (72/8 = 9). When you are using the formula, do not use the decimal equivalent of a percent. For example, .08 = 8%. When using the rule of 72, only use the percentage form i.e 8 in this example. Check out the table below for some additional calculations!
|Rate of Return||Formula||Number of Years to Double Investments|
The Rule of 72 is pretty simple, right? Well, it may be simple, but it is also reasonably accurate when you are trying to see how long it will take to double your investment. If you want to play around with some of the numbers, check out the “Rule of 72 Calculator” here. Remember, investing is a long term game, so it can take longer than you may expect to see the returns you are hoping for. Just remember this quote:
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
This quote can be applied to pretty much every type of investment out there!
Well that was a short article, wasn’t it? The Rule of 72 is very straightforward, so I do not believe it needs further explanation. If you disagree, comment below! Make sure you check out the Rule of 72 Calculator as well! Cheers!