Why does rule of 70 work

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Dictionary of Economics Course videos. A Absolute Advantage. Adverse Selection. Aggregate Demand. Aggregate Supply Long Run. Asymmetric Information. Austrian Business Cycle Theory. B Banks. Bond Market. Budget Constraints. Business Fluctuations. C Capital Goods. Club Goods. Common Resource. Coase Theorem. Comparative Advantage. Compensating Differentials. Consumer Surplus. Conditional Convergence. Crowding Out. Cyclical Unemployment. D Deadweight Loss. Demand Curve. Discouraged Worker.

Division of Labor. E Economic Growth. Efficient Market Hypothesis. Elasticity of Demand. Elasticity of Supply. Equation of Exchange. Equilibrium Price. F Factor Income Approach. Federal Funds Rate. Financial Intermediaries. Fiscal Multiplier. Fiscal Policy. Fisher Effect. Free Rider Problem. Frictional Unemployment. G Great Depression. Great Recession.

Gross Domestic Product. The rule of 70 has other applications outside of the investment space. For example, the rule of 70 can be used to predict how long it would take for a country's real GDP to double. The rule of 69 and the rule of 72 are two alternatives to the rule of They differ in their accuracy for investments with different compounding frequencies which measure how often your interest compounds.

Both calculations function similarly to the rule of 70, except they divide the annual rate of return by 69 and 72, respectively, to derive the doubling time. In general, the rule of 69 is considered to be more accurate for calculating doubling time for continuously compounding intervals, especially at lower interest rates.

The rule of 70 is deemed more accurate for semi-annual compounding, while the rule of 72 tends to be more accurate for annual compounding. While the rule of 70 has some impressive benefits, it also has some downsides:. The Kelley Financial Group. Corporate Finance Institute. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance.

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