How long will it take: The Rule of 72

In the world of finance, there’s a thing called The Rule of 72.

What that rule is about is to basically let you estimate how long it will take to double your money, given an amount of expected return.

There’s actually a complicated way in explaining The Rule of 72 but in this article, I’ll keep it simple.

I’ll be using an example to illustrate The Rule of 72:

Assume you invested $100 with an expected return of 13% p.a.

Using The Rule of 72:

72/13 = approximately 5.5 years.

In other words, you’ll double your money in about 5 years 6 months. Do take note that it is a rough estimate.

Read more on the Wikipedia entry here.

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About nadlique

This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

Comments

  1. gosh! at the current FD rate.. it’ll takes more than 20 years!

  2. Hehe. I guess that’s why I don’t go for FDs.

  3. if u dont go for FD, do u have any alternative? (besides ASB), which I’m hoping has more interesting return? If u have, do share yah? thanx! 🙂

  4. Well, due to the fact that I’ve got time on my hand, I can tolerate riskier investments.

    As for now, I invest in unit trusts, ETFs, and property. Other than that, I’m trading Contract-for-Differences (CFDs) at the moment.

    Bear in mind though that whatever I’m comfortable with might not be everyone’s cup of tea. I’m expecting an above average return from my ventures but I understand that I might lose money in the process.

  5. I don’t aware there are rule 71, 70, and 69.3. 😀

  6. Yup, there are also rules 71, 70, 69.3 and etc. I’m just sticking with the more conventional rule 72 in this entry 😉

  7. Faris says:

    “the rule of 72”
    I have come across about this in
    Templar’s Rules of Wealth before =)

    I enjoy reading your entry.
    Keep up the good writing.

  8. Thanks faris 🙂

    Is Templar’s Rules of Wealth a good book?

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