The One Essential Rule for Smart Investing: Understanding the Rule of 72

Here's the only one rule you will ever need to remember when investing your money.

I'm Tyler, a former financial advisor and portfolio manager. Now I make financial content for free so that you don't have to pay for it.

Understanding the Rule of 72

Number one, the Rule of 72 estimates how long it should take you to double your money.

Number two, 72 divided by your expected return will give you the number of years it will most likely take to double your money.

Example Scenarios

Number three, if I invest 100% of my money in stocks and expect a 10% nominal return, it should take me just over seven years to double my money or just over a decade to double the purchasing power of my money, because I would use 7%.

Number four, whereas if I invest in bonds and expect a nominal return closer to 4%, it will take me closer to 18 years to double my money or closer to 36 years to double the purchasing power of my money.

Final Thoughts

Number five, if you're planning for your future and you want to estimate how long on average it might take you to double your money based on how much interest you expect to receive, just remember the Rule of 72, and you'll have a pretty good idea.

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