Compound Interest and Exponential Growth: The Rule of 72

Heartland Advisors Value Investing Rule of 72 GraphicInvestments grow by earning regular compound interest. In theory, even a relatively small principal investment can grow into a very large sum because of this exponential growth.

The Rule of 72 is a tool for understanding these concepts, estimating how long an investment will take to double, and setting long-term investment goals.

The Rule is applied by taking the number 72 and dividing it by the rate of return of an investment. The result is the number of years it will take for that money to double.

For example, if an investment has grown at a 6% average annual rate, it would double in value in about 12 years. The table below offers several additional, hypothetical examples:

Annual Rate of Return (%)Years Until Investment Doubles
172
236
418
612
89
107.2

U.S. stocks historically have delivered a compounded annual return of 8%.*

Who to Contact with Questions

Contact the Shareholder Services Team at 800-432-7856, or send an email. The Team is available 8 a.m. to 7 p.m. CT, Monday to Friday.

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©2017 Heartland Advisors | 789 N. Water Street, Suite 500, Milwaukee, WI 53202 | Business Office: 414-347-7777 | Financial Professionals: 888-505-5180 | Individual Investors: 800-432-7856

*Source: Political Calculations as of 6/30/2012

The Rule of 72 is a mathematical concept and is not illustrative of any Heartland investment. The examples generated are hypothetical and are for illustrative purposes only. It does not guarantee or predict how an investment will perform. It is an approximation of the effect of given rates of return and assumes a long-term investment horizon of greater than 20 years. It is important to keep in mind that most investments, including mutual funds, do not grow at a steady rate and the Rule of 72 should only be used as a guide in setting long-term investment goals.

The Heartland Funds are distributed by ALPS Distributors, Inc.

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