Rule of 72
Definition
A simple formula to estimate how long an investment will take to double in value: divide 72 by the annual return rate.
Explanation
At 8% annual return, money doubles in approximately 72/8 = 9 years. At 12%, it doubles in 6 years. At 4%, it takes 18 years. The Rule of 72 works because of the mathematics of compound interest: ln(2)/ln(1+r) ≈ 72/r for reasonable interest rates. It's a powerful tool for quick mental math and illustrates why small differences in return rates matter enormously over long periods. The difference between 7% and 10% annual return means doubling in 10.3 years versus 7.2 years — three extra years of waiting for each doubling.
How Stoquity Uses This
Stoquity incorporates rule of 72 analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.