Rule 72 is a simplified formula that calculates how long it will take for an investment to double in value, based on its rate of return.
Rule 72 applies to compound interest rates and is fairly accurate for interest rates ranging from 6% to 10%.
Rule 72 can be applied to anything that increases exponentially, such as GDP or inflation; it could also point to the long-term impact of annual fees on investment growth.
This valuation tool can also be used to estimate the rate of return needed to double the investment given the investment period.
In different situations it is better to use Rule 69, Rule 70 or Rule 73.