The Rule of 72

The power of compounding can be truly amazing. An investment of only $1000 earning 12% will grow to $30,000 in 30 years, compounded annually. If the investment was only earning 6%, it would be worth less than $6,000 over the same time period. 

In order to determine quickly how long it takes to double your investments at different rates, I usually use the rule of 72. I simply divide 72 by the annual percentage growth to obtain the time it would take me to double the investment. Thus if you earn 12% annually for example it would take you 6 years to double your investment. 

At 6% it would take you twice as long or twelve years to double your investment. In order to determine quickly how long it takes to triple your investments at different rates, I usually use the rule of 115. I simply divide 115 by the annual percentage growth to obtain the time it would take me to double the investment. Thus if you earn 5% annually for example it would take you 23 years to triple your investment. At 13% it would take you nine years to triple your investment. 

 Relevant Articles:

 - Dow 370,000

- My Dividend Growth Plan - Stock Selection

- When to sell your dividend stocks?

- The ultimate passive investment strategy