The rule of 72 is an approximation method for determining how many years it will take a given investment to double in value given a specified interest rate.  72 divided by the interest rate equals the number of years that the investment will require to double in value.

 

Example:  XYZ Fund has a 5% return.  How long will it take to double in value?

 

                   72 / 5 = 14.5 years

 

The rule of 72 can also be used to determine at what percentage an investment's return must be given the number of years required to double in value.

 

Example:  XYZ Fund needs to double in value in 3 years.  What percentage return must

                   be had?

 

                    72 / 3 = 26% return

 

The rule of 72 is only an approximation.  As the percentage rate increases the error between actual and approximation increases as well.