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What is the rule of 72?

There are dramatic benefits to using time to help grow your investment. Advisers often refer to the ‘magic’ of compounding. The rule of 72 is a technique to estimate the number of years a sum of money, which is invested at a certain compound interest rate, will double. The rule of 72 is used by dividing 72 by the rate of interest earned.

For example, an investment having a compound interest rate of 8 % will double a sum of money in approximately 9 years, (72/8) and an investment having a compound interest rate of 15% will double in approximately 4.8 years (72/15).