Investor Corner/Start here/Foundations
1.1.7 Rule of 72
Divide 72 by an expected annual return, and the result is roughly how many years it takes for money to double. It is a mental shortcut, not a formula, and it is remarkably accurate for the returns most portfolios actually target.
The shortcut
The Rule of 72 is a quick way to estimate doubling time without a calculator. At 12% a year, money doubles in about 72 ÷ 12 = 6 years. At 8%, it takes about 9 years. At 6%, about 12 years. The relationship is not exact, it comes from the mathematics of compounding, but it stays close enough to the true figure across the return ranges most investors actually deal with.
Why it's worth knowing by heart
The rule turns an abstract percentage into something tangible: not "12% a year" but "my money doubles roughly every six years." That framing makes it much easier to judge whether a goal is realistic. A 15-year runway at 12% isn't just "a long time", it's enough for money to double roughly two and a half times over.
Where the approximation breaks down
The rule is reasonably accurate between about 4% and 15%. Outside that range, or for very short periods, the estimate drifts further from the true figure, and an actual compound-interest calculation is worth doing instead. It's a tool for quick intuition, not for the final number in a financial plan.
How PriLytics helps. Once your money is actually invested, the Rule of 72 becomes a rough guide rather than the real number. PriLytics tracks your own XIRR against your own timeline, so you always know exactly how your portfolio is compounding. See your own numbers.