How much time does it take to double your money? Rule of 72 explains…
To guide in this, we bring you a simple do-it-yourself (DIY) rule of thumb known as the 'Rule of 72'.
The 'Rule of 72' provides investors a basic calculated estimate of how many years it would take to double your money in any particular investment tool. The maths is simple: Divide the rate of returns by 72, the answer is the number of years it would take you to to double your investment in that particular instrument.
According to Investopedia, The Rule of 72 is 'handy' for a quick mental guage of the approximate value of an investment. Key highlights: A simplified formula, it calculates how long it'll take for an investment to double in value, based on its rate of return.
It applies to compounded interest rates and is 'reasonably accurate' for interest rates that fall in the range of 6-10 per cent.
Besides investment, it can be applied all exponential increases such as inflation and GDP. Fixed deposits (FDs): Most bank FDs range from 7 days to 10 years, with varying interest rates. For banks such as State Bank of India and ICICI Bank, you can get anything between 3-7 per cent on FDs. Thus, if you intend to invest ₹ 1 lakh in a bank FD with an interest rate of 7 per cent per annum, let's calculate how long it would take to double your money using Rule of 72: 72/7 = 10.28 years.
Most bank FDs range from 7 days to 10 years, with varying interest rates. For banks such as State Bank of India and ICICI Bank, you can get anything between 3-7 per cent on FDs. Thus, if you intend to invest 1 lakh in a bank FD with an interest rate of 7 per cent per annum, let's calculate how long it would take to double your money using Rule of 72: 72/7 = 10.28 years. Public Public Provident Fund (PPF): For the current financial year, the interest on PPF is 7.1 per cent, which using the Rule of 72, will also take you around 10 years to double investment: 72/7.1 = 10.14 years.
For the current financial year, the interest on PPF is 7.1 per cent, which using the Rule of 72, will also take you around 10 years to double investment: 72/7.1 = 10.14 years. What about equities? If we consider Nifty50, it has given a 13.5 per cent return in 2024, and 80 per cent in five years. So, an investment of ₹ 1 lakh in equities will double ( ₹ 2 lakh) in five years assuming a 5.33 per cent interest rate. The formula is applied as below: 72/13.5 = 5.33 years.
If we consider Nifty50, it has given a 13.5 per cent return in 2024, and 80 per cent in five years. So, an investment of 1 lakh in equities will double ( 2 lakh) in five years assuming a 5.33 per cent interest rate. The formula is applied as below: 72/13.5 = 5.33 years. Mutual funds: Disciplined investment in mutual funds are expected to give around 12-15 per cent returns.Which means that an investment of ₹ 1 lakh in MFs will double ( ₹ 2 lakh) in six years assuming a 12 per cent interest rate: 72/12 = 6 years
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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