Understand the Rule of 72 with one chart, the most magical formula in the investment world!

1. If the annual investment return is 10%, your principal will double in 7.2 years.

2. If the monthly investment return is 10%, your principal will double in 7.2 months.

3. If the daily investment return is 10%, your principal will double in 7.2 trading days.

01. What is the Rule of 72?

Anyone with a basic understanding of finance has probably calculated this: how long will it take for assets to double in wealth management?

Of course, this can be determined through a simple middle school math operation: (1+i)^n=2, where i is the investment return rate, and the exponent is the time to double the asset.

But for professionals in the financial industry, this can be calculated mentally.

Because there is a particularly magical number: 72.

The magic of this number lies in:

Dividing 72 by your “annual investment return rate” gives the number of years needed to double your assets.

02. The magic of the Rule of 72

This rule not only helps you estimate the approximate interest in the complex world of mathematics but also serves as a reference for long-term investment and financial planning.

Based on the same logic, if you want to double your principal in 5 years, what annual return do I need? The answer is: 72/5=14.4%.

Using the “Rule of 72,” let’s compare how long it takes for various mainstream investment methods to double assets:

1. Bank savings: The current one-year fixed deposit interest rate is 1.5%, so the time to double the principal is: 72/1.5=48 years.

2. Government bonds: The current one-year government bond yield is about 2.2%, so the time to double the principal is: 72/3=33 years.

3. Yu'ebao: The current annualized yield is about 2.8%, so the time to double the principal is: 72/3.5=26 years.

4. Cryptocurrency wealth management: The current average annualized yield is about 12%, so the time to double the principal is: 72/12=6 years.