Rule of 72: Every investor’s first question is, “How many years will it take for my money to double?” Whether you’re investing in fixed deposits (FDs), mutual funds, P2P loans, or the stock market, understanding how to calculate returns is crucial. The Rule of 72 provides an easy answer to this question. It’s a simple mathematical formula that lets you determine when your investment will double without the need for a calculator or app.
What is Rule of 72?
The Rule of 72 states that if you want to know how many years it will take for your money to double at a certain interest rate, divide 72 by that interest rate. Formula: Doubling time (in years) = 72 ÷ Interest rate (%) For example, if your investment is at 8% annual interest, then 72 ÷ 8 = 9 years, meaning your money will double in 9 years.
Benefits of Rule of 72
Fast and easy calculations: Understand the growth of any investment in seconds.
Better Comparison: You can do comparative analysis of different investment schemes (FD, SIP, Shares, Gold etc.).
Planning aid: This rule can help you determine how effective your long-term financial planning will be.
Overall, the Rule of 72 is a simple yet useful tool in the world of investing. It helps you understand how many years it will take for your money to double at a given interest rate. If you’re just starting out with investing, this rule can make your financial planning easier and more sensible.