The rule of 72 has a simple formula behind it. It gives you an easy way to find how long it’ll take an investment to double. Feel free to test out my rule of 72 calculator with different examples. Then continue reading below to find how it works. This rule ties into a core investing concept every investor should know…

**Rule of 72 Calculator**

I’ve limited this calculator to 4% through 20%. That’s because the further outside this range, the rule of 72 becomes less useful. I’ll show you an even tighter sweet spot in a chart below. Also, if you’re earning consistent 20%+ annual returns, you could probably teach me a thing or two 🙂

This tool and the formula behind it are simple. It’s a good rule of thumb. The rule of 72 is an easy way to find how long it’ll take an investment to double. For example, how long will it take $100 to double at an annual rate of 5%? Let’s calculate the answer…

**Rule of 72 Formula and Error Chart**

The rule of 72 formula is simple math. Take the number 72 and divide that by the constant rate of growth. If you expect your investment to grow at 5% each year, you’d take 72 divided by 5 (don’t use 0.05). And that gives us an answer of 14.4 years.

But how close is this to the real time it’d take the investment to double?

With a lot more math, you’d find that it takes 14.2 years to double. And that’s not far off from using the quick rule of 72. However, the bigger or smaller numbers you use, the rule of 72 becomes less reliable.

Here’s a chart I made that shows how the error grows…

Right around 7-8% will give you the most accurate answers. And going out from there, the Rule of 72 error grows.

To gain an even better understanding of this investing concept, let’s look at another example. You’ll see how this rule compares to real investment growth…

**Rule of 72 Example and Table**

For another rule of 72 example, let’s use a 12% annual return. How many years will it take this investment to double?

Taking 72 divided by 12 gives us an answer of six years exactly. But here’s how the investment would really growth each year…

Start | $100 |

Year 1 | $112 |

Year 2 | $125.44 |

Year 3 | $140.49 |

Year 4 | $157.35 |

Year 5 | $176.23 |

Year 6 | $197.38 |

At the end of year six, it’s just short of having doubled. It’d take closer to 6.12 years to double. Although it’s not perfect, the Rule of 72 is an easy formula that can help account for compounding…

**Rule of 72 and Compound Interest**

As you can see in the table, a 12% annual return compounds each year. In year one with an investment of $100, you’ll earn $12 = ($100 × 12%). Then in year two, that interest is put back to work. You’d get $13.44 = ($112 × 12%).

Each year you’re putting more interest to work for you. The rule of 72 and compound interest overlap with some underlying logic. And compound interest is one of the most important investing concepts to learn.

I also made this free CAGR calculator and it dives deeper into this concept. I made it beginner friendly as well. I strive to give clear and easy-to-understand explanations. If you have any comments or questions, feel free to contact me anytime.