The

THE “Rule
“RULE of
OF72”
72” Cheat Sheet
CHEAT SHEET
Double your money every 7 years.

What is the Rule of 72?

The Rule of 72 is a simple equation to help you determine how long an investment will take to double at
a given growth rate.

Here’s How the Rule of 72 Works:

At 10%, money doubles every 7.2 years - and when you divide 7.2 by 10% you get 72.

This rule of thumb helps you compute when your invested money will double at a given growth rate.
For example, if you want to know how long it will take to double your money at 9% interest, divide 9
into 72 and you’ll get 8, for 8 years.

Follow along with the sample below

to work through the calculations:

1 Determine the equity growth rate for a wonderful business you’ve invested in, or plan
to potentially invest in.

2 Choose the timeframe you want to figure out the rate for. This can be 1, 3, 5, or 10
years – or anything in between.

3 Make a small chart that covers the number of years you have information for, and fill
in the equity information you’ve found on the business’s financial statements:

In the example below, we’re using numbers from a sample stock “ABC Corp” from
1998 to 2004 (6 years).

Year 1998 1999 2000 2001 2002 2003 2004

Equity 136 195 365 454 602 750 936

Lesson 5: Think Like An Investor

 Set up a chart similar to the one above that covers the number of years you want to
calculate for your wonderful business.

Year

Equity

4 Round off the oldest number to something that will be easy to ‘double’ in your head
(e.g., you would round 136 to 150 for ABC Corp.)

Write it here: _______________

5 Keep doubling the number you wrote in box 4 until you reach or exceed the number
from the most recent year (936).

For ABC Corp, double 150 to 300, 300 to 600, and 600 to 1,200 to get a total of 3
doubles to equal 936 or larger).

Write how many times you doubled the first number: _______________

6 Divide the number of years from box 2 by the number of doubles from box 5.

This is the number of years it took the business to double.

(example: ABC Corp is 6 years ÷ 3 doubles = 2, meaning it would take a little less than
2 years to get your investment money doubled with ABC Corp at these rates)

Write your answer here: _______________

7 Divide the number 72 by your answer from box 6.

When you divide the number of years it takes to double your money into 72, you get
the growth rate.

(For ABC Corp, you’d take 72 ÷ 2 = 36, or a 36% growth rate.)

Write your answer below

This is the growth rate: _______________%

Lesson 5: Think Like An Investor