Calculating when your investments will double

March 21, 1993|By Knight-Ridder News Service

How long does it take for an investment to double in value? You can get a pretty good idea by using the "Rule of 72."

Divide 72 by the total return your investment is earning. For example, if you invest $1,000 in a certificate of deposit earning 5 percent, you would have $2,000 in 14.4 years. (72 divided by 5 equals 14.4.)

Warning: This rule works only if the annualized return remains stable for the life of your investment and you reinvest your earnings.

Investors can use this rule when setting financial goals. Suppose you had $1,000 that you wished to double in 10 years. What rate of return would you have to earn to achieve that goal?

To find out, divide 72 by the number of years the money will be invested. In this case, 72 divided by 10 equals 7.2. So you would need to earn 7.2 percent each year for your $1,000 to double in 10 years.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.