The last post talked about the effects of compounding. That got me thinking. Have you ever wondered how long it would take you to double your money? Or, maybe you knew how long you anticipate doubling your money, but wanted to know the rate of return that would allow you to do so.

Luckily, there’s a handy math trick to help you compute just that. Let’s say I want to double my money, and have various investment options with a rate of return of 4%, 6% and 9% respectively. Obviously, 9% would be favorable and common sense would help infer that it would be the quickest route of the 3 to double your investment.

But how long would each Rate of Return take to double your money?

The Trick

If you divide the rate of returns (as whole numbers, not percentages) by 72, the result would be the number of years it would take to double your money.

72/4 = 18

72/6 = 12

72/9 = 8

It would take 18 years, 12 years and 8 years, to double your money at a rate of return of 4%, 6% and 8%, respectively.

Conversely, let’s say we have $10,000 and want to double it to $20,000 within about 3 years. What would our annual rate of return consistently have to be to achieve this?

The same calculation applies

Except this time, we can divide the number of years by 72 to get the required rate of return.

72/3 =24

You would have to invest $10,000, at an annual rate of return of at least 24% to grow this amount to $20,000 within 3 years.

I hope this cool little trick was helpful, and that it has compounding benefits for you in the future.