In the world of investment, every person has the same question, “When will my hard earned money double?” Whether you invest in mutual funds, invest money in the stock market, invest in fixed deposits (FD) or choose a safe option like Public Provident Fund (PPF), each option has its own separate return rate. In such a situation, investors often keep wondering when their money will be doubled and what is the right way for it. But do you know that a very easy mathematical formula can answer your question in a pinch? Yes, we are talking about the Rule of 72. This is an easy and effective way, so that you can know how many years your money can be doubled.
What is ‘Rule of 72’?
‘Rule of 72’ is a very easy way to know when your money can be doubled. It is very simple to understand and for this you do not need any complex calculation. Just 72 should participate with the annual interest rate (or return) of your investment and the number that comes will tell how many years your money will be doubled.
Suppose, if you have 8% annual return on your investment, then you will get 9 if you share 72 from 8. This means your money will double in about 9 years. This method is especially for those who want to find out out quickly about investment and do not want to calculate more complex.
Which areas do this formula use?
Rule of 72 ‘is not limited to investment only, but it is also useful in many other areas. This is a way a super cool tool, which helps to understand many types of things in a quick and easy way. First of all, it is very beneficial for investment with compound interest.
For example, if you have to know how many years your money will be doubled, then this formula tells in an easy way. This is especially useful for investments in which the return is between 6% to 10%. Apart from this, this formula is also useful in understanding inflation and economic development (such as GDP growth). For example, if the rate of inflation is 4%, then the purchasing power of your money i.e. the power of shopping will be half in 18 years. Meaning, you get 18 years after giving 72 participated by 4.
How does Rule of 72 work in real life?
- Bank Fixed Deposit (FD): Suppose you have invested 1 lakh rupees in the bank FD, and you are getting 7% annual interest. You get about 10.28 years if you share 72 from 72 according to ‘Rule of 72’. That is, your money will double in about 10 years and 3 months.
- Public Provident Fund (PPF): The current interest rate of PPF is 7.1%. According to this, you get 10.14 years when 72 participated from 7.1. Meaning, it will take about 10 years and one and a half months to double your money.
- Equity Investment: If you invest in the stock market, such as the Nifty 50, which gave an average of 13.5% return in 2024, then you get about 5.33 years when you share 72 from 13.5. That is, your money at this return rate can double in five and a half years.
- Mutual Fund: If you invest regularly in mutual funds and get 12% annual returns on an average, then you get 6 years to share 72 from 12. That is, your investment can double in 6 years.