Glossary
Rule of 72
The Rule of 72 is a quick mental math shortcut: divide 72 by your annual rate of return to estimate how many years it takes for an investment to double in value.
Why it matters
The Rule of 72 makes abstract compounding tangible. It immediately reveals the real cost of low returns: money in a 1% savings account takes 72 years to double, while a 10% stock market return doubles in just 7.2 years. It also works in reverse — at 3% inflation, the purchasing power of cash is cut in half every 24 years.
Example
At 7% annual return: 72 / 7 = ~10.3 years to double. $50,000 becomes $100,000 in about a decade without adding another dollar.
How Ray helps
Ray can project doubling times for your various accounts based on their historical returns. Ask to see the Rule of 72 applied to your actual balances.
$ ray "at my current savings rate, how long until my investments double?"Related terms
Compound Interest
Compound interest is interest earned on both your original principal and on previously accumulated interest.
APY (Annual Percentage Yield)
APY is the real rate of return on a savings or investment account, accounting for the effect of compounding interest.
Time Value of Money
The time value of money (TVM) is the principle that a dollar today is worth more than a dollar in the future, because today's dollar can be invested to earn returns.
Inflation
Inflation is the rate at which the general level of prices for goods and services rises, reducing what each dollar can buy.
Yield
Yield is the income return on an investment, expressed as a percentage of the investment's cost or current market value.