Ask the Fool Explaining the Rule of 72

Q: What's the "Rule of 72"? - E.W., Mobile, Ala.A: It offers a quick and easy way to figure out how long it will take for your money to double at various rates of growth. Imagine that your money is earning 4 percent in interest annually. Take 72 and divide it by 4 and you get 18, meaning that it would take roughly 18 years for you to double your money. If you are earning 10 percent interest (lucky you!), you would double your money in about 7.2 years.

Inquirer

Published Jun. 10, 2008, 3:01 a.m. ET

What's the "Rule of 72"?

- E.W., Mobile, Ala.

It offers a quick and easy way to figure out how long it will take for your money to double at various rates of growth. Imagine that your money is earning 4 percent in interest annually. Take 72 and divide it by 4 and you get 18, meaning that it would take roughly 18 years for you to double your money. If you are earning 10 percent interest (lucky you!), you would double your money in about 7.2 years.

The results from this rule are not precise, but they are pretty close for growth rates up to about 15 percent and are not too far off even at 25 percent.

The rule also works in reverse. If you want to double your moolah in six years, just divide 72 by 6 and you will see that you would need an average growth rate of roughly 12 percent.

Can I buy fewer than 100 shares of stock in a company?

- J.L., Salisbury, Md.

You sure can. You can usually buy as little as one share at a time. Just pay attention to the commissions you pay your broker. If you buy one $50 share of stock and pay a $15 commission, you're out 30 percent from the get-go. It is sometimes best to accumulate cash and then buy more at once.

If you're buying stock directly from a company, such as through a dividend reinvestment plan (a "DRIP"), your money can buy fractions of shares at a time. For example, a $50 contribution would buy you 0.67 shares of a $75 stock. Learn more about DRIPs at