(This blog is a reprint of one I wrote a year ago talking about an investment tool to broadly predict an investment return.)

Well, you have an investment strategy that will earn a certain amount. How long do you have to use this strategy to double your money? You can either use software like TValue or a scientific calculator to come up with the exact amount of years, or you can use ‘The Rule of 72!’

So now you ask, what is ‘The Rule of 72?’ (Glad that you asked.) It is an easy and approximate calculator someone can quickly use to either figure out how long it will take to double your money earning a fixed percentage annually or how much you have to earn to double your money in a certain time (?????)

Okay, you have $100,000 that you figure you can get a nine percent return on. Divide 72 by 9 and you get 8. It will take you eight years earning 9% to double your money. It is easy to use because 72 has a lot of whole number divisors (36, 18, 12, 9, 8, 6, 4, 2) so as a quick way to mentally come up with a time frame to double, it works very well. It is not exact (using a scientific calculator or software you would come up with 8.04 years earning 9 percent), but for a quick calculation it works well. It can also be used for other factors, like inflation. If inflation is 3.6%, how long would it take for inflation to half the value of the country’s currency. The answer is about 20 years (72/3.6). 

Well, now you have some tools to quickly give you pointers on investing and inflation. Class dismissed, and don’t say I never taught you anything!

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