Formulating the Doubling, Tripling, and Quadrupling of Your Capital

The Rule of 72 is a simple method for calculating the time it will take to double your capital through any investment. The only variable you have to determine is the average annual rate of return.

Key Points

• The Rule of 72 determines how long it will take for an investment to double based on a fixed annual rate

• The only calculation required is to divide the number 72 by the annual rate of return

• For example, at a rate of return of 10% per annum, the initial investment doubles in just over seven years

• Correspondingly, there are also Rules 115 and 144 for the calculation of how long it will take to triple and quadruple your initial investment

 

 Using the Rule of 72

To determine the number of years it will take to double the original investment, simply divide the number 72 by the constant rate of return. 

■ 72 / Annual Return = Years of investment doubling

Examples

For example, if an investment is expected to return an average of 4% per year, it will take 18 years to double the initial capital.

■ 72 / 4% = 18 years

Whereas, if an investment is expected to return an average of 12% per year, it will take 6 years to double the initial capital.

■ 72 / 12% = 6 years

The table below shows how many years it will take to double the initial investment, based on different annual rates of return:

Annual Return	Years for Doubling	Annual Return	Years for Doubling
1%	72	10%	7.20
2%	36	15%	4.80
5%	14.4	20%	3.60
6%	12	25%	2.88
7%	10.3	30%	2.40
8%	9	35%	2.06
9%	8	40%	1.80

If you earn 10% per year on an investment, your capital will double every seven years or so.

 

Reversing the Rule of 72

By reversing the Rule of 72, you can calculate how much you need to invest, and at what annual rate of return, to achieve a certain financial goal in the future.

Example

Let's say you are 35 years old, have 100,000 euros, and your goal is 800,000 euros at the age of 50, that is, in 15 years.

■ Aim to turn 100,000 euros into 800,000 euros in 15 years

■ With a return of 14.4% your money doubles every 5 years

■ So, with an annual return of 14.4%, in 15 years the 100 thousand euros will become 800,000 euros

You would need to earn 14.4% annually to achieve your financial goal.

 

 

 The Rule of 115 - Tripling Investment Capital

For calculating the tripling years of an investment, you can use the Rule of 115.

Dividing 115 by the annual rate of return of an investment calculates the number of years it will take.

■ 115 / Annual Return = Years Required for Trippling

For example, if an investment returns an average of 10%, annually, it will take approximately 11.5 years to triple the initial capital.

■ 115 / 10% = 11.5 years

 

 The Rule of 144 – Quadrupling Investment Capital

For calculating the quadrupling years of an investment, you can use the Rule of 144.

This time, 144 is divided by the annual rate of return to calculate the number of years it will take to quadruple.

■ 144 / Annual Return = Quadrupling Years

For example, if an investment returns an average of 10%, annually, it will take approximately 14.4 years to triple the initial capital.

■ 144 / 10% = 14.4 years

 

■ The Rule of 72, 115, 144

G.P. for TradingCenter.org (c)