The Rule of 72 is an easy way to calculate how long it will take your investment to double in value. Here's how it works. This rule is a convenient mathematical shortcut used to determine the amount of time for an investment to double in value (or halving time) based on a fixed annual rate of return.
The rule is an easy-to-remember calculation: Simply divide 72 by the annual rate of return for an investment. If an investment has an expected return of 8%, for example, dividing 72 by 8 gives you 9. This means it would take approximately 9 years for your investment to double in value.
The Rule of 72 allows investors to estimate the number of years it would take for their portfolio to double, given a certain yield level. It is particularly useful for long-term investment planning and setting realistic expectations.