Returns And The Rule Of 72

Be cautious of anyone promising unusually high returns. The top money managers in the world are well-known, and if something sounds too good to be true, it usually is. What qualifies as a “good” return depends entirely on your goals, the specific asset class, and the appropriate benchmark. For some investments, a 6% annual return can be excellent—but only when compared to the right peer group and market benchmark.

Before dismissing a return as “bad,” take a moment to understand the asset class and identify the proper benchmark. Once you compare performance in the right context, you can make a much more informed judgment.

A simple tool you can use is the Rule of 72, which helps estimate how long it takes for an investment to double. Just divide 72 by your expected annual return. For example:

• At a 10% return, your investment doubles in about 7.2 years.

• At an 8% return, it doubles in roughly 9 years.

That 2-year difference shows how powerful even small changes in return can be when compounding over time. We try to get you those extra couple of percentage points by writing covered calls and high probability credit spreads.