The Rule of 72 is a way for you to easily and quickly determine how long it would take for your money to double in value.  Of course, this method is based on a fixed annual interest rate and therefore can’t really be trusted when you apply it to a fluctuating return that you get from a stock market portfolio; however, it does come in handy to estimate the number of years needed to double your investment.

Here’s how it works.  Take the number 72 and divide it by the interest rate you have or hope to receive on your investments.  Let’s work out a few examples together.

If you were to invest let’s say $5,000 at 2%, it would take 36 years for it to double to $10,000.

(72 divided by the interest rate of 2% = 36 years).  Pretty pitiful, right.  This is why when the GIC rates were so low last year, many advisors considered them to be the “fastest way to go broke.”  They certainly didn’t keep up with inflation.

If you were to invest the same $5,000 at 7%, it would take 10 years and 3 months for it to double to $10,000.

That’s better.  (72 divided by 7 = 10.285).