What is the Rule of 69?
The Rule of 69 is used to estimate the amount of time it will take for an investment to double, assuming continuously compounded interest. The calculation is to divide 69 by the rate of return for an investment and then add 0.35 to the result. Doing so yields an approximately correct estimate of the time period required. For example, an investor finds that he can earn a 20% return on a property investment, and wants to know how long it will take to double his money. The calculation is:
(69 / 20) + 0.35 = 3.8 years to double his money
Using the Rule means that a prospective investment can be easily analyzed with a calculator, rather than needing an electronic spreadsheet for a more precise return calculation.
A variation on the concept is the Rule of 72, which is used for situations in which the rate of return is relatively low. The Rule of 72 yields less accurate results as the rate of return increases.
