The Rule of 72
When you’re investing, it’s encouraging to have an idea of how quickly your money can grow. The Rule of 72* gives a rough estimate of the time it takes for it to double. Simply divide the number 72 by your investment’s expected rate of return, and the result is the approximate number of years for your money to double.
Put Time on Your Side
Put Time on Your Side The Rule of 72 makes it powerfully clear that it’s best to start investing early — and the higher the rate of return, the better.
Notice how a $5,000 investment at age 29 doubles faster as the rate of return increases. These potential growth rates are exciting to think about.
But consider the interest rate on your credit card. Is it 18%? Higher? The Rule of 72 can work against you just as powerfully as it can work for you. That’s why debt management is always essential when you’re building wealth.
*The Rule of 72 is a mathematical concept that approximates the number of years it will take to double the principal at a constant rate of return compounded over time. All figures are for illustrative purposes only, and do not reflect the risks, expenses or charges associated with an actual investment. Past performance is not an indication of future performance. The rate of return of investments fluctuates over time and, as a result, the actual time it will take an investment to double in value cannot be predicted with any certainty. Results are rounded for illustrative purposes. Actual results in each case are slightly higher or lower. This illustration does not include fees or taxes, or take into account inflation all of which would lower performance. It is unlikely that an investment would grow 8% or greater on a consistent basis, given current market conditions.
