Rule of 70
Candlefocus EditorThe equation for the Rule of 70 is quite simple. Simply divide the number ‘70’ by the rate of return (percentage) to find the number of years it will take for the investment to double in value. For example, if you make an investment with a 10 percent rate of return, it will take approximately seven years for that investment to double in value (70 ÷ 10).
In addition to its simple formula, another appealing feature of the Rule of 70 is its theoretical capabilities. In many cases, the Rule of 70 will yield a close approximation of the actual doubling time – however, that is not always the case. The Rule of 70 is just an estimate, so it's important to remember that the rate of return can fluctuate over time and could lead to inaccuracies in the initial calculation.
Therefore, the Rule of 70 should never be looked upon as a definitive answer when it comes to determining the rate of growth for a particular investment. When it comes to investing, no one single calculation every provides all answers. Though, the Rule of 70 can be used as a helpful tool to get a better understanding of how long it takes for a specific investment to double. When evaluating different investments, it's important to analyze both the rate of return and how long it takes the investment to double. Utilizing the Rule of 70 can help investors make more informed decisions and potentially provide useful insight into their portfolios.