What technique is used to estimate how long it will take to double your investment?

The technique used to estimate how long it will take to double your investment is the Rule of 72. This rule provides a simple formula that allows investors to quickly gauge the time needed for an investment to grow to twice its initial value based on a fixed rate of return. By dividing 72 by the annual interest rate (expressed as a whole number), you can get an approximate number of years it will take for the investment to double.

For instance, if your investment has an average annual return of 6%, you would divide 72 by 6, giving you approximately 12 years for the investment to double. The Rule of 72 is a handy mental shortcut that helps investors make quick assessments regarding compounding interest, distinguishing it from more complex calculations that involve time value of money, amortization, or average return formulas that do not specifically relate to the simplicity of doubling an investment.