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A simple formula for estimating how long it takes an investment to double in value: divide 72 by the annual rate of return.
At an 8% annual return, your money doubles in approximately 9 years (72 / 8 = 9). At 6%, it takes 12 years. At 12%, it takes 6 years. The rule also works in reverse: at 3% inflation, your purchasing power halves in 24 years. The Rule of 72 is a quick mental math tool that illustrates the power of compound interest and the importance of fees. An investment earning 7% after fees doubles in about 10.3 years, while the same investment earning 6% after a 1% fee doubles in 12 years. That one percentage point of fees costs you nearly two extra years of growth per doubling period.