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The rule of72 is a simple formula that tells you the approximate amount of time or interest rate needed for an amount to double. The formula is Years X Rate per year =72. Here's how it works. If you invest an amount for8 years at9% annual interest it will double (because8 years X9% =72). If you invest an amount for9 years at8% it will also double (since9 years X8% =72). If your investment earns6%, it will take12 years for it to double (since12 years X6% =72; or72 divided by6 =12). If you invest $1,000 at12% compounded annually, it will grow to approximately $2,000 in6 years (6 X12 =72; or72/12 =6). If the $2,000 continues to earn12% each year, six years later the investment will be worth $4,000. If the investment continues to earn12% per year, then in six more years it will have a value of $8,000. If successful investors were able to earn18% each year, the value of their portfolios would have doubled every four years (72 divided by18 =4). If the investors live a long life and continue to earn18% compounded annually they will become very wealthy.
