The Rule of 72 and XEQT: How Fast Your Money Actually Doubles

I was sitting in a pub in downtown Toronto with my friend Dave about four years ago when the conversation turned to money. Dave had just opened a high-interest savings account that was paying 2.5% – this was before rates went up – and he was genuinely excited about it. “Free money,” he said, tapping the table for emphasis. “I just park my cash there and it grows.”

I grabbed a napkin. I wrote the number 72 at the top, drew a line underneath it, and wrote 2.5 below. Then I did the division right there on the napkin.

“At 2.5%,” I said, “it takes about 29 years for your money to double.”

Dave stared at the napkin. “Twenty-nine years?”

“Twenty-nine years. You put in $10,000 today, and in 2053 you’ve got $20,000.”

Then I wrote another line. 72 divided by 8. “Now look at this. At 8% – which is roughly what a globally diversified equity portfolio has returned historically – your money doubles in 9 years. Not 29. Nine.”

Dave went quiet for a moment. Then he said something I’ll never forget: “Why did nobody teach me this in school?”

That napkin math was the Rule of 72. It is the simplest, most powerful mental shortcut in all of investing. It takes five seconds to calculate, it requires zero financial expertise, and once you understand it, you will never look at interest rates, investment returns, or your own portfolio the same way again.

This post is about that rule, how it applies to XEQT specifically, and why it should fundamentally change the way you think about growing your wealth as a Canadian investor.

1. What Is the Rule of 72?

The Rule of 72 is a simple formula that tells you approximately how many years it takes for an investment to double in value, given a fixed annual rate of return.

Here it is:

Years to Double = 72 / Annual Return (%)

That is the entire formula. No spreadsheets required. No financial calculator. Just division.

If your investment earns 6% per year, it takes roughly 72 / 6 = 12 years to double. If it earns 9% per year, it takes 72 / 9 = 8 years. If it earns 3%, you are looking at 72 / 3 = 24 years.

The rule works because of compound interest – the fact that your returns earn returns, which earn returns on returns. It is not exact down to the decimal (it is an approximation), but it is remarkably accurate for rates between about 2% and 15%. For quick back-of-napkin calculations, it is all you need.

Where Does the Rule of 72 Come From?

The Rule of 72 has been around for centuries. The earliest known reference comes from Luca Pacioli, an Italian mathematician, who mentioned it in his 1494 book Summa de Arithmetica. Traders in Renaissance Italy were using this formula more than 500 years ago.

The mathematical basis is the natural logarithm of 2 (approximately 0.693), which when multiplied by 100 gives 69.3. The number 72 is used instead because it is divisible by more small numbers (2, 3, 4, 6, 8, 9, 12), making mental math easier.

A Quick Accuracy Check

Let’s verify. If you invest $10,000 at exactly 8% compounded annually:

• After 9 years (Rule of 72 estimate): $10,000 x (1.08)^9 = $19,990

That is $10 short of a perfect double. The Rule of 72 predicted 9 years, and after 9 years you have $19,990. Close enough to call it perfect for practical purposes.

2. The Doubling Time Table: From Slow to Fast

Here is a table that shows how long it takes money to double at various annual return rates. These are the rates most relevant to Canadian investors considering different types of investments.

Look at that table for a moment. Really look at it. The difference between 4% and 8% is not “twice as fast.” It is the difference between doubling your money in 18 years versus 9 years. That means at 8%, you get two doublings in the same time it takes a 4% investment to deliver one.

That gap is the entire argument for equity investing over so-called “safe” investments, summarized in a single column of numbers.

3. How the Rule of 72 Applies to XEQT

So where does XEQT fit into this picture?

XEQT (iShares Core Equity ETF Portfolio) is a globally diversified, all-equity ETF that holds over 9,000 stocks across Canada, the United States, international developed markets, and emerging markets. It is managed by BlackRock and trades on the Toronto Stock Exchange.

Since its inception in August 2019, XEQT has delivered annualized returns in the range of approximately 8-9% (depending on the exact measurement period and whether you include dividends). Global equity markets have historically returned roughly 7-10% annualized over long time horizons, depending on the specific index and the period measured.

For our Rule of 72 calculations, let’s use three scenarios:

Conservative estimate (7% annualized):

• 72 / 7 = 10.3 years to double

Mid-range estimate (8% annualized):

• 72 / 8 = 9 years to double

Optimistic estimate (9% annualized):

• 72 / 9 = 8 years to double

Even in the conservative case, your XEQT investment doubles in about a decade. That is a genuinely powerful result. It means a 25-year-old who invests $10,000 today could see that money double four times before they reach traditional retirement age – turning $10,000 into $160,000 without adding another dollar.

Which brings us to the most exciting part of the Rule of 72.

4. The Power of Multiple Doublings

A single doubling is nice. Multiple doublings are where things get genuinely life-changing.

Here is what happens to a one-time investment of $10,000 in XEQT at an 8% annualized return, using the Rule of 72:

Read that last line again. A single $10,000 investment, left alone for 45 years at 8%, becomes $320,000. That is a 32x return, and you did absolutely nothing except not sell.

This is what compound growth actually looks like. The first doubling adds $10,000. The fifth doubling adds $160,000. Each doubling is worth more than all the previous doublings combined, which is why the single most important factor in building wealth is time in the market.

Let me put it another way. If you are 25 years old and you invest $10,000 in XEQT today:

• At age 34, you have $20,000
• At age 43, you have $40,000
• At age 52, you have $80,000
• At age 61, you have $160,000
• At age 70, you have $320,000

And remember, this is a single $10,000 contribution. We have not even talked about what happens when you keep adding money – which we will get to shortly.

5. XEQT vs GICs vs Savings Accounts vs Inflation

The Rule of 72 is not just useful for understanding how fast your money grows. It is devastating at exposing how slowly “safe” investments actually work – and how inflation silently destroys purchasing power.

Let’s compare doubling times across the most common places Canadians put their money:

Starting amount: $10,000 in each case. Over 36 years, XEQT turns it into $160,000. A GIC turns it into $40,000. A savings account gets you to roughly $24,000. And if you stuffed your cash under a mattress, inflation would cut its real purchasing power roughly in half.

That last row is worth lingering on. Inflation has its own Rule of 72. At 2.5% annual inflation, the purchasing power of your dollar halves every 29 years. If you are “saving” money in a chequing account earning 0%, you are not keeping your money safe. You are watching it slowly evaporate.

This is why the debate between “safe” investments and equity investing is not really about safety at all. GICs protect you from short-term volatility, but they expose you to long-term purchasing power erosion. XEQT exposes you to short-term volatility, but it protects you from the slow, silent destruction of inflation.

At 4% (GIC rates), you get 2 doublings in 36 years. At 8% (XEQT’s historical range), you get 4. Those extra 2 doublings are not additive – they are multiplicative. Two extra doublings mean your money is four times larger. The difference between $40,000 and $160,000 is the difference between a modest supplement and a genuinely meaningful nest egg.

6. The Real-World Caveat: Returns Are Not Linear

I need to be honest about something. The Rule of 72 assumes a fixed, constant annual return. XEQT does not deliver a smooth 8% every single year. In any given year, it might be up 20% or down 15%. So does the Rule of 72 still work?

Yes, it does – but only over longer time horizons.

The Rule of 72 describes the average compounding behaviour over many years. Think of it like driving from Toronto to Montreal: your speed is not a constant 110 km/h the entire way, but if you arrive in 5 hours, your average speed was about 110 km/h. The Rule of 72 is your average speed.

Over 5-year periods, actual returns might diverge significantly from the prediction. Over 20 or 30 years, the Rule of 72 has historically been remarkably accurate for broadly diversified equity portfolios.

The Rule of 72 is not a promise that your $10,000 will be exactly $20,000 nine years from today. It is a historically grounded estimate that works over long periods. If your investment horizon is measured in decades, the Rule of 72 is one of the most reliable planning tools you have.

The key requirement is that you stay invested through the bad years. If you panic-sell during a 20% drop and wait to “feel safe” before reinvesting, you break the compounding chain. The formula assumes you buy and hold. If you actually buy and hold, it works.

7. How Regular Contributions Accelerate the Doubling

Everything we have discussed so far assumes a single lump-sum investment. But most of us do not invest that way. Most Canadian investors are contributing regularly – biweekly with each paycheque, monthly, or quarterly – and this changes the math dramatically.

Here is why: when you contribute regularly, each contribution starts its own doubling clock.

Imagine you invest $500 per month into XEQT. Your January contribution starts compounding immediately. Your February contribution starts one month later. Each $500 has its own 9-year countdown to doubling (at 8%). After 9 years, your very first $500 has doubled to $1,000. A year later, your second contribution doubles. Then the third. It is a cascade of doublings that builds on itself month after month.

Let’s look at the actual numbers. If you invest $500 per month into XEQT at 8% annualized:

Look at that 30-year row. You contributed $180,000 of your own money. Your portfolio is worth $745,000. The compound growth – the money your money earned – is $565,000. That is more than three times what you put in. The Rule of 72 is working on every single one of those 360 monthly contributions simultaneously, each one on its own doubling timeline.

At year 30, your portfolio is generating roughly $60,000 per year in growth on its own. Your $500 monthly contributions become almost irrelevant compared to what compounding is doing. The snowball is rolling downhill, and it is enormous.

This is why “start early” is not a platitude. It is arithmetic. Every year you delay is a year of doubling you will never get back.

8. The Rule of 72 Applied to Your Specific Situation

Let me walk through two concrete scenarios that Canadian investors commonly face.

Scenario 1: The New Graduate

• Age: 23, starting amount: $5,000, monthly contribution: $300, XEQT at 8%, time horizon: 42 years

At 8%, that initial $5,000 doubles roughly 4.7 times in 42 years – about $130,000 from the lump sum alone. Combined with $300/month contributions compounding over 42 years, the estimated portfolio at age 65 is over $1.2 million. Total contributed: $156,360. Total growth: over $1 million in compound returns.

Scenario 2: The GIC-to-XEQT Switcher

• Age: 35, current GIC portfolio: $80,000 earning 4%, switch to XEQT at 8%, no additional contributions, 30-year horizon

At 4% (staying in GICs), the $80,000 doubles about 1.7 times in 30 years, reaching roughly $260,000. At 8% in XEQT, it doubles about 3.3 times, reaching roughly $805,000. The difference is $545,000 – from the exact same starting amount, with zero additional contributions. That is the cost of the “safety” premium in GICs over a multi-decade horizon.

9. Advanced Rule of 72 Tricks

Once you have the basic formula down, here are a few variations worth knowing.

• Inflation erosion. The Rule of 72 works for inflation too. At 3% inflation: 72 / 3 = 24 years for your dollar to lose half its value. At 5% inflation (which we saw recently): 72 / 5 = 14.4 years. Terrifyingly fast.

• Real returns. To calculate doubling time in real (inflation-adjusted) terms, subtract inflation first. XEQT at 8% minus 2.5% inflation = 5.5% real return. Rule of 72: 72 / 5.5 = 13.1 years to double your purchasing power. More honest than the nominal number.

• Debt in reverse. The Rule of 72 works against you too. Credit card debt at 20% doubles in 72 / 20 = 3.6 years. Before you invest in XEQT or anything else, clear high-interest debt. The math demands it.

• Triple and quadruple. Use the Rule of 114 (114 / rate) for tripling and the Rule of 144 (144 / rate) for quadrupling. At 8%, your money triples in about 14.25 years and quadruples in 18 years.

10. Common Mistakes When Using the Rule of 72

The Rule of 72 is simple, but people still manage to misuse it. Here are the most common errors to avoid.

Mistake 1: Using it with short time horizons. The Rule of 72 is a long-term tool. Over 1-3 year periods, actual returns will vary wildly. The rule works best over 10+ year horizons.

Mistake 2: Ignoring fees. If your investment returns 8% but you pay 2% in fees, your effective return is 6%. Use 6% in the formula. This is why XEQT’s low MER of 0.20% matters – a mutual fund charging 2% takes 12 years to double instead of 9.

Mistake 3: Forgetting about taxes. Returns in a TFSA compound tax-free, so the Rule of 72 applies directly. In a taxable account, taxes reduce your effective return. Hold XEQT in a TFSA or RRSP whenever possible.

Mistake 4: Assuming the future will match the past. Historical returns of 8-9% are a reasonable assumption, but not guaranteed. Use a range of estimates (7-9%) rather than a single number.

Mistake 5: Not accounting for inflation. A nominal doubling in 9 years is exciting, but inflation means your doubled money will not buy twice as much. Subtract inflation from your return for realistic planning.

11. Why XEQT Is the Ideal Vehicle for the Rule of 72

Not every investment is equally suited for long-term Rule of 72 compounding. Here is why XEQT is particularly well-suited:

• Global diversification. XEQT holds over 9,000 stocks across dozens of countries, smoothing out lumpy returns and making the long-term average more reliable.

• Low fees. At a 0.20% MER, XEQT keeps almost all gross return in your pocket. A typical Canadian mutual fund at 2%+ MER nets you 6% (doubling in 12 years) versus XEQT’s 7.8% net (doubling in 9.2 years). Over a lifetime, those extra 3 years per doubling cost hundreds of thousands of dollars.

• Automatic rebalancing. BlackRock rebalances XEQT’s underlying ETFs for you. Buy and hold is the entire strategy.

• 100% equities. XEQT targets the highest expected long-term returns. For investors with 10+ year horizons, the short-term volatility is worth the faster doubling time.

• Easy to automate. On Wealthsimple, set up automatic deposits and recurring XEQT purchases. Every paycheque starts a new Rule of 72 doubling clock without you lifting a finger.

High expected returns, low fees, broad diversification, and effortless automation make XEQT arguably the single best vehicle for letting the Rule of 72 work over decades.

The Bottom Line

The Rule of 72 is not complicated. It is not advanced financial theory. It is division. Seventy-two divided by your annual return equals the years until your money doubles.

But simple does not mean unimportant. The Rule of 72 reveals the fundamental truth of wealth building: time and return rate are the only two variables that matter, and time matters more.

Here is what the Rule of 72 tells us about XEQT:

• At a conservative 7% return, your money doubles every 10.3 years
• At a mid-range 8% return, your money doubles every 9 years
• Over 36 years, a single $10,000 investment could grow to $160,000
• Regular $500/month contributions at 8% could grow to $745,000 in 30 years
• The difference between XEQT’s returns and a GIC over 30 years is potentially hundreds of thousands of dollars

Every day you are not invested, you are losing compounding time you can never get back. The Rule of 72 does not care about market timing or stock-picking skill. It cares about two things: the rate of return you earn and the number of years you stay invested.

XEQT gives you the return. Your patience gives you the time. The Rule of 72 does the rest.

I still have that napkin somewhere. The ink is fading, but the math has not changed. Seventy-two divided by eight equals nine. That was true in Renaissance Italy, it was true in that Toronto pub, and it will be true for as long as compound interest exists.

Start your first doubling today.