What is the Rule of 72? How is it used in investing?

The Rule of 72 is useful for understanding compound interest because it shows the approximate time or interest rate required to double a sum of money (e.g., $2,500 to $5,000).

To apply the Rule of 72 to your own personal investments, you need to know or assume their expected rate of return. For example, you may own a bond that you know will regularly pay 6% interest until maturity or assume that the average annual return on your stocks is …