The Rule of 72 and the Rule of 113: A Simple Way to Think About Compounding

Have you ever wondered how long it will take your money to double or even triple once it is invested? Recently I learned about two quick mental math shortcuts that make this easy, and I might be late to the party, but they are too handy not to share. They are called the Rule of 72 and the Rule of 113. These rules are back-of-the-napkin estimates, not precision finance, yet they are surprisingly useful when you want a fast read on what compounding can do for savings, retirement accounts, or even investment property equity.

What the rules say

• Rule of 72: Divide 72 by your annual rate of return to estimate how many years it will take your investment to double.

• Rule of 113: Divide 113 by your annual rate of return to estimate how many years it will take your investment to triple.

These work best for steady, annually compounded returns in the mid single digits to low teens. They are approximations, but close enough for quick planning.

A quick example with the S&P 500

Let’s say you have $10,000 invested in a broad market index like the S&P 500. Over the last decade, the average annual return has been a little above 12%. Using the mental math:

• Double: 72 ÷ 12 = 6 years

• Triple: 113 ÷ 12 ≈ 9.4 years

If the average return actually materialized each year, your $10,000 would be about $20,000 in roughly 6 years, and about $30,000 in a little over 9 years. Real markets move up and down, so think of this as a compass, not a map.

Why these shortcuts are helpful

• They make compounding feel real. Seeing “6 years to double” is more motivating than seeing “12%.”

• They help with goal setting. If you know how fast money could grow, you can back into timelines for college savings, down payments, or retirement targets.

• They frame trade-offs. A higher rate of return shortens time, and a lower rate stretches it out, which helps you compare options with different risk, liquidity, and effort.

At different returns, how long does it take?

Here is a quick reference you can keep handy.

Use this as a guide when you are comparing strategies, from stock index funds to additional principal payments on a mortgage, or even buying a rental.

What about real estate in Portland and SW Washington?

Compounding shows up in property too, just in slightly different ways.

• Amortization builds equity every month. Your principal paid down is a guaranteed return of sorts, because it reduces what you owe.

• Appreciation compounds over time. If a property appreciates at an average of 4% to 5% per year, the Rule of 72 suggests equity could double in about 14 to 18 years, even before considering principal pay-down.

• Leverage can accelerate outcomes. A 5% appreciation on a home where you put 10% down increases your equity by more than 5%, because you control a larger asset with a smaller cash investment. Leverage also adds risk, so make sure your numbers are conservative and your reserves are healthy.

• Cash-flow improvements matter. Smart renovations, better tenant screening, or improved management can raise net operating income, which raises property value for income properties.

If you are a homeowner or an aspiring investor in the Portland metro, this is where a simple rule can kick off a deeper conversation about timelines, financing, and the most efficient path to your goals.

Accuracy, caveats, and fine print

• These rules are approximations. Actual doubling time depends on compounding frequency and the exact return path.

• Taxes and fees slow compounding. Account for advisory fees, fund expenses, and capital gains or income taxes.

• Volatility matters. Averages hide the sequence of returns. A 12% average does not mean 12% every year.

• Use the rules for quick estimates, then build a detailed plan with real numbers.

Try it with your goals

• Saving for a down payment at a 7% target return, 72 ÷ 7 ≈ 10.3 years to double.

• Building a college fund at a 6% target, 72 ÷ 6 = 12 years to double.

• Growing a rental portfolio where you target an 8% blended return from cash flow and appreciation, 72 ÷ 8 = 9 years to double equity, before leverage effects.

If you want help applying this to your situation, we are happy to run the numbers with Portland-specific scenarios and options in SW Washington as well.