Compound Interest: The Rule of 72

The Rule of 72 concept states that by dividing the number 72 by the rate of return being earned will provide the approximate number of years for the original investment to double. This hypothetical example shows how an initial $10,000 investment grows over time at a steady 8% rate of return.

compound-interest-the-rule-of-72

The Rule of 72 tells us that an investment earning a constant 8% rate of return should double approximately every 9 years. So, if you made a $10,000 investment at age 29, with an 8% rate of return, it should grow to about $160,000 by age 65. ($20k, $40k, $80k, $160k).

The Rule of 72 is a mathematical concept that approximates the number of years it will take to double the principal at a constant rate of return compounded over time. All figures are for illustrative purposes only, and do not reflect the risks, expenses or charges associated with an actual investment. The rate of returnof investments fluctuates over time and, as a result, the actual time it will take an investment to double in value cannot be predicted with any certainty. Results are rounded for illustrative purposes.

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