Rule of 72 Calculator
Rule of 72 calculator tells you how much time it takes for something to double given a certain level of constant growth rate. The term "doubling time" can be used interchangeably - our tool could also be called "doubling time calculator", because these two terms are synonymous. We've also included a nifty trick that lets you easily do it manually, see below in the "what is rule of 72?" section. This is actually a special kind of compound interest, where you are trying to find how long it will take for something (for example your investment) to increase by 100%. It's a fairly narrow case, but it is actually quite common.
What is the rule of 72?
The rule states that in order to get the estimated doubling time, simply divide
72 by the percentage growth over a single period. For example, if something grows by
5% per minute, then it will double in roughly
72 / 5 = 14.4 minutes. The actual number is closer to 14.2067, but this example should give you an idea of the difference between the rule of a thumb method and the true value.
Things to consider when using the doubling time calculator
- It gives you exact number (well, it's usually rounded), while a "manual" rule of 72 calculation gives you a ballpark figure.
- Rule of 72 calculator is unit-agnostic. It doesn't matter if we're talking about seconds, minutes, days or dog years.
- It works just as well in reverse. For example, if you want to double your web traffic in
52 weeks, you know it needs to grow by
- It assumes that the percentage growth is exactly the same each period, so it works very well with simple interest (when it basically boils down to compound annual growth rate). Please be aware, however, that percentages (such as your web traffic's increase) often fluctuate and are never stable, so known the limitations of this calculation.
Four recommendations for doubling your investments
- In the stock market if you are sure of your investment, you can try to reduce your average cost per share. Then it is easier to double.
Just think about it, if you have invested 20 USD per share instead of 30 USD, then when the stock gets to be 40 USD, you already double. In the later case, you would have to wait until 60 USD.
In the stock market, look for companies with high Earnings per share growth. Specifically, you should look for companies that are reporting over 10% EPS CAGR, those ones are the most likely to double your investment if they sustain such earnings growth.
In the stock market, you also have to consider your company operating efficiency. One way of doing that is to measure the ebitda margin. Remember you should look for EBITDA margin positive and growing. That indicates a company that is doing better and better over time and might double your investment in the near future.
Companies that follow the point #2 and #3 usually grow faster in price than the average market. As a consequence, the beta of such stocks is higher than 1. To build a portfolio with high beta means you have more probability of beating the market but also, to suffer larger losses on a market crash.
Another way to increase your income includes an instrument called: option contracts. Such investments are high risk but high rewards. However you can use them in strategies like bear call spread or bear put spread to profit during a market crash.