The Rule of 72 is a simple and quick formula used to estimate the number of years it will take for an investment to double in value, based on a fixed annual rate of return. To use it, you divide 72 by the annual compound interest rate (expressed as a whole number, not a decimal). For example, if the interest rate is 12%, you divide 72 by 12, which equals 6 years for the investment to double
. This rule works best for interest rates between about 6% and 10%, with the most accurate results near 8%. It is a mental math shortcut often used by investors to get a quick approximation without complex calculations. The Rule of 72 can also be used inversely to estimate the rate of return needed to double an investment within a certain number of years
. While it is a useful tool for quick estimates, for precise calculations, especially outside the typical interest rate range, more exact compound interest formulas or financial calculators should be used
