Time and time again every investor faces question of allocating hardly earned cash. Obviously, his or her aim is to find an investment vehicle offering highest possible per annum return at an acceptable risk.

However, how many investors than go on and calculates how long does it take, at any given compounded rate of return, for his investment to double, triple or quadruple in value?

I looked around for some answers to this and here is the table I found most useful:

Rule 72
Of course in real life you don’t always have similar table ready at hand when you need most. In such cases you can use another well known tool to your assistance, Rule 72.

All you need to remember is number 72. By dividing a potential yearly return into 72 the resulting product will tell you how many years it takes for such return to double the value of your money (e.g. potential yearly return 8% => 72 / 8 = 9 years to double your money).

As you understand by now, the rule can be also used to find out what kind of yearly return you should be looking for if you aim at doubling your money within a certain time frame (e.g. wanting to double my money in 5 years I would need to invest in vehicle returning 72 / 5 = 14.4% per annum).

This entry was posted on Wednesday, January 31st, 2007 at 11:55 am and is filed under Investing jargon. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.