Understanding the Rule of 70 | GoCardless

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The rule of 70 offers a way to figure out the doubling time of an investment. In other words, it shows you how many years it will take for your initial deposit ... SkiptocontentOpensitenavigationsidebarWhyGoCardless?ForusecaseSubscriptionpaymentsRecurringpaymentsbuiltforsubscriptionsInvoicepaymentsCollectinvoicepaymentsautomaticallyOurcustomersCasestudiesOurcustomerssuccessesCustomersloveusHearfromourcustomersCustomersuccessOurcustomerfirstapproachCustomerHubTrainingresources,documentation,andmoreForenterpriseOverviewReducechurnReduceinternationalbarriersReduceoperationalcostsReducetimetogetpaidReduceconversionriskForsmallbusinessOverviewImproveyourcashflowKeeptrackofpaymentsReducecostsReducefailedpaymentsIncreaseconversionsProductFeaturesRecurringpaymentsIdealforsubscriptionsandinvoicesInstantBankPayIdealforone-offpaymentsInternationalpaymentsCollectfrom30+countriesSuccess+ReducepaymentfailuresVerifiedMandatesStoppaymentfraudIntegrationsAPIintegrationsBuildacustomintegrationPartnerintegrationsConnectto200+partnerappsPartnersAllpartnersGoCardlessforSalesforceBillingGoCardlessforZuoraGoCardlessforXeroPricingResourcesHelp&SupportCustomerHubTrainingresources,documentation,andmoreAPIdocumentationGuidesforintegratorsFAQCommonquestionsansweredNews&resourcesGuidesandeBooksIndustryresearchWebinars,Podcasts&EventsBlogNewsAGuidetoACHPaymentsLoginSignupBreadcrumbResourcesFinanceUnderstandingtheRuleof70LastEditedJul2021—2minreadTableofcontentsWhatistheruleof70?Whentousetheruleof70Howtocalculatedoublingtime?Ruleof70vs.ruleof72Ruleof70andcompoundinterestThebottomlineWhenyoumakeaninvestment,howquicklywillitdoubleinsize?Whilegrowthratesareimpossibletopredictwith100%accuracy,thereareseveralmeasurementstohelp.Onehandyestimationtoolistheruleof70.We’llrevealhowtocalculatedoublingtimeusingtheruleof70below.Whatistheruleof70?Theruleof70offersawaytofigureoutthedoublingtimeofaninvestment.Inotherwords,itshowsyouhowmanyyearsitwilltakeforyourinitialdeposittodoubleinsize.You’llneedtoknowthespecificrateofreturninordertousetheruleof70ordoublingtimeformula.Althoughitwon’tgiveyoupreciseresults,calculatingdoublingtimeisusefulforgeneralestimationpurposes.Thiscalculationisalsousedtocomparedifferentinvestments.Ifeachinvestmenthasitsownrateofreturn,youcanusetheruleof70tofigureoutwhichonewilldoubleyourmoneymorequickly.Whentousetheruleof70Thedoublingtimerulecanbeappliedtomostinvestments.It’sfrequentlyusedwhencomparingmutualfundsorgrowthratesforinvestmentportfolios.Becauseitlooksatlong-termvalue,it’softenappliedtoretirementportfolios.Investorswanttoknowthattheirinvestmentwillyieldhighenoughreturnswithinaspecifictimeframe.Bylookingatthedoublingrate,theycandecidewhethertodiversifytheirportfoliotoincreaseitsgrowthrate.Thereasonwhytheruleof70ispopularinfinanceisbecauseitoffersasimplewaytomanagecomplicatedexponentialgrowth.Itbreaksdowngrowthformulasintoasimpleequationusingthenumber70alongsidetherateofreturn.Thisconceptisalsousedtomeasurethedoublingtimeofacountry’sgrossdomesticproduct(GDP),whichishelpfulincomparinggrowthbetweendifferenteconomies.Howtocalculatedoublingtime?Youcancalculatethedoublingtimeofinvestmentsusingasimpleequation.However,togetstartedyou’llfirstneedtoknowtheinvestment’sannualrateofgrowth.You’llthendivide70bythisgrowthrateaccordingtothedoublingtimeformula.Here’swhatitlookslikewrittenoutasanequation.Doublingtimeformula:DoublingTime=70/AnnualGrowthRateTheresultshowsyouthetime,inyears,itwilltakeforyourinvestmenttodouble.Forexample,ifyourmutualfundisgrowingatanannualrateof5%,youwoulddivide70by5toseethatitwouldtakeapproximately14yearsforittodouble.Ruleof70vs.ruleof72Theruleof70isn’ttheonlydoublingtimeruleoutthere.Youmightalsoseereferencetotheruleof72,aswellastheruleof69.Theseequationsarenearlyidentical,buttheysimplyusedifferentdividendstocometoslightlydifferentresults.Theruleof72leadstolongerdoublingtimes,makingitaslightlymoreconservativeestimate.Ruleof70andcompoundinterestOneimportantfactorthatshouldbeconsideredwhendetermininganinvestment’sfuturegrowthiscompoundinterest.Thisisinterestcalculatedovertimeonaninitialorprincipalamount.Ratherthanstayingstatic,theinterestalsoincludesaccumulatedinterestfrompreviousperiods.Thehigherthenumberofperiods,thehigherthevalueofcompoundinterest.Thiswillimpactthetimeittakestodoubleyourmoney,soshouldbelookedatalongsidetheruleof70.ThebottomlineNotallinvestmentswilldoubleinexactlytheamountoftimeshownthroughthissimplemathequation.However,ifyouwantaquickestimateofhowlongitwilltaketodoubleyourinitialinvestment,theruleof70canbeofsomeservice.It’sparticularlyhelpfulifyouneedtocomparemultipleinvestments,providingusefulinsight.WecanhelpGoCardlesshelpsyouautomatepaymentcollection,cuttingdownontheamountofadminyourteamneedstodealwithwhenchasinginvoices.FindouthowGoCardlesscanhelpyouwithadhocpaymentsorrecurringpayments.Over70,000businessesuseGoCardlesstogetpaidontime.Learnmoreabouthowyoucanimprovepaymentprocessingatyourbusinesstoday.GetStartedLearnMoreRelatedtopicsFinanceRecommendedforyou2minread—AccountantsWhatAreSourceDocumentsinAccounting?Aninvoiceisasourcedocumentforaccountingstatements.2minread—AccountantsWhatAreSourceDocumentsinAccounting?2minread—AccountantsHowtoCalculateavg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