The Rule of 72: How Long Will It Take to Double Your Investment?

Every investor asks the same question eventually. When will my money double? It is the golden benchmark for measuring the success of an asset, whether you are looking at a savings account, a share portfolio, or an investment property in Brisbane or Melbourne.

While financial modelling can get complicated quickly, there is a simple mental shortcut used by savvy investors

to estimate growth without needing a spreadsheet. It is called the Rule of 72.

What exactly is the Rule of 72?

The Rule of 72 is a quick calculation that estimates the number of years it takes for an investment to double in value at a fixed annual rate of return. It is based on the power of compound interest. The formula is incredibly straightforward.

Years to Double = {72} / {Annual Rate of Return}

You simply take the number 72 and divide it by your expected annual growth rate or interest rate. The result gives you the approximate timeline in years.

Let’s look at some Australian examples

To see how this works in the real world, let's apply it to a few common scenarios we see in the current market. Imagine you have $100,000 to invest.

• High-Interest Savings Account (4%): If you leave your money in a term deposit earning 4%, you divide 72 by 4. It will take roughly 18 years to turn that $100k into $200k.

• The Australian Share Market (8%): If a diversified ETF returns an average of 8% per year, you divide 72 by 8. Your money doubles in just 9 years.

• Residential Property (6%): If you buy a property in a steady growth corridor in VIC or NSW with a conservative 6% capital growth, 72 divided by 6 equals 12 years.

This simple math highlights why chasing slightly higher returns makes such a massive difference over time. Moving from a 4% return to an 8% return does not just earn you a little more money. It literally cuts the waiting time in half.

Why this matters for property investors

For property buyers, the Rule of 72 is useful for setting realistic expectations. We often hear about properties doubling every 7 to 10 years. For that to happen, you need a compound annual growth rate of roughly 7.2% to 10%.

While some boom cycles in Sydney or Perth might deliver double-digit growth in a single year, the long-term averages usually sit closer to that 6% to 8% mark for quality assets. This rule helps you spot marketing hype. If someone promises your investment will double in 3 or 4 years, they are implying a sustainable return of 18% to 24%, which is incredibly rare and comes with significant risk.

The hidden cost of inflation

The Rule of 72 is a double-edged sword. It can also tell you how quickly inflation will halve the purchasing power of your money.

If inflation sits at 4%, as we have seen in recent fluctuations, you divide 72 by 4. This means in 18 years, your cash in the bank will buy half as much as it does today. This is a primary driver for property investment. You need your assets to grow faster than the rate at which your money loses value.

It is an estimate, not a guarantee

While this rule is a fantastic tool for quick mental math, it is not perfect. It assumes the interest or growth rate remains constant year after year, which rarely happens in the real world. Property markets move in cycles of growth, stagnation, and correction.

There are also external costs the rule ignores:

• Taxes: Capital Gains Tax (CGT) will affect your net result when you sell.

• Entry Costs: Stamp duty and legal fees reduce your starting capital.

• Maintenance: holding costs for property can eat into your net yield.

Using the rule to plan your portfolio

Understanding the Rule of 72 allows you to make decisions based on logic rather than emotion. If your goal is to turn a $150,000 deposit into a significant nest egg over 20 years, you can work backward to find the rate of return you need to target.

It reminds us that time in the market is often more powerful than trying to time the market. The earlier you start, the more doubling cycles your capital can go through. A property bought today could potentially double twice before you retire, providing substantial equity to fund your lifestyle.

Keen to understand how this applies to your situation? We’ll help you break it down and plan the next step.

Disclaimer:

The information in this article is general in nature and does not take into account your personal financial, legal, or tax circumstances. Property structures, tax regulations, and superannuation rules may change over time. You should seek advice from a qualified professional and refer to the latest ATO and government guidelines before making any investment or structuring decisions.