Rule of 72

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If you want to know how quickly your money will double at a certain interest rate, you can use the “Rule of 72”.

The Rule of 72 is an invention of a fifteenth century Italian mathematician named Luca Pacioli, aka “The Father of Accounting and Bookkeeping”. Luca is quoted as saying:

“A voler sapere ogni quantità a tanto per 100 l’anno, in quanti anni sarà tornata doppia tra utile e capitale, tieni per regola 72, a mente, il quale sempre partirai per l’interesse, e quello che ne viene, in tanti anni sarà raddoppiato. Esempio: Quando l’interesse è a 6 per 100 l’anno, dico che si parta 72 per 6; ne vien 12, e in 12 anni sarà raddoppiato il capitale.”

Very roughly translated this means if you want to know how many years it will take to double your money, divide the interest rate into the number 72. For example, if you have an annual interest rate of 6%, and divide 72 by 6, you will have 12, which is how long it will take to double your money.

So, for instance, if you were to invest in a dividend stock with an approximate 6% dividend, such as Iron Mountain (NYSE: IRM), you could expect your investment to double in approximately 12 years, assuming no change in the value of the stock. 

The Motley Fool believes IRM is a well-run company positioning itself at the intersection of physical and digital data storage, an increasingly important area considering our massive production of data on a daily, weekly, monthly basis. While most of this data is pure garbage, probably, it points to a trend in storage of data by default, garbage or not.