Master Mental Math with the Rule of 72
The Rule of 72 is an incredibly simple, surprisingly accurate method used by investors to estimate how long an investment will take to double in value, given a fixed annual rate of return. Instead of complex logarithmic equations, you just divide the number 72 by your interest rate.
How It Works
Scenario A: Interest Rate
You have an investment earning 8%.
Calculation: 72 / 8 = 9.
It will take approximately 9 years to double your money.
Scenario B: Target Years
You want to double your money in 6 years.
Calculation: 72 / 6 = 12.
You need an annual return of approximately 12%.
Why 72?
Mathematically, the natural logarithm of 2 (doubling) is approx 0.693. So in a perfectly continuous efficient world, it would be the "Rule of 69.3". However, 72 is chosen because it has many divisors (1, 2, 3, 4, 6, 8, 9, 12, etc.), making it much easier to calculate in your head.