ET Mutual Funds Explains: Want to know how many years will your investment take to double? Use Rule 72 (2024)

Synopsis

This method provides an accurate measurement. It is more helpful when an investor uses lower interest rates rather than the higher ones. It is more used for situations which involve compound interest. The one which involves a simple interest rate does not work well with this method.

ET Mutual Funds Explains: Want to know how many years will your investment take to double? Use Rule 72 (1)

Rule 72 is a method used to find the number of years an investment will take to double in value. In other words, this method is easy to calculate how long the invested amount will be doubled at a specific rate.

This method provides an accurate measurement. It is more helpful when an investor uses lower interest rates rather than the higher ones. It is more used for situations which involve compound interest. The one which involves a simple interest rate does not work well with this method.

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Rule 72 is considered as a good educational tool that helps investors to know about the impact of compounding on their wealth.

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It is known that inflation reduces the purchasing power of money over time. The Rule of 72 also helps in calculating the effect of inflation on the investments. This method helps in calculating how much time it will take for a portfolio to double investments due to inflation.

How to calculate using Rule 72? Divide the rate of return by 72. For example, an investor invested Rs 2 lakh and around 9% rate of return is offered.

Rule 72 = 72/r

Where r is rate of return

Therefore, Rule 72 = 72/9

= 8 years

This indicates that it will take 8 years to double the investment.

The below mentioned helps you in determining how many years will it take to double your investments with different rate of return

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Alternatively Rule 72 can also be used to determine the rate of return. It means that it will help an investor to know the rate of return at which they will be able to double their investment.

Rule 72 = 72/t

Where t is duration of time

For example, if an investor wants to double their investment in 4 years, then what will be the rate of return?

Rule 72 = 72/4

= 18%

This indicates that if an investor wants to double the investment in four years, then they will earn an 18% rate of return.

The below mentioned table helps you in determining what rate of return you will earn at different time periods

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ET Mutual Funds Explains: Want to know how many years will your investment take to double? Use Rule 72 (2024)

This method provides an accurate measurement. It is more helpful when an investor uses lower interest rates rather than the higher ones. It is more used for situations which involve compound interest. The one which involves a simple interest rate does not work well with this method.

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