Rule of 72: Find out how long it takes for your Rs 5 lakh to double to Rs 10 lakh with this simple formula

What is the Rule of 72?

It’s a quick formula to estimate how long it takes for an investment to double based on a fixed annual rate of return. Just divide 72 by the rate of return.

Key Uses of the Rule of 72

• Estimate Investment Growth: Predicts when your investment will double.
• Simple Calculation: A fast way to check if you're on track to meet your financial goals.
• Approximation: Not exact, but close enough for practical use.

How the Rule of 72 Works

Purpose: Calculates how long it will take to double your investment based on a fixed interest rate. It can also estimate how inflation halves the value of your money.

Formula

T≈72÷R
Where:

• T = Time to double the investment
• R = Interest rate (%)

Limitations

• Works best around an 8% interest rate.
• Less accurate for rates much higher or lower than 8%.

Formula Breakdown

• Basic Calculation: Divide 72 by the annual rate of return.
• Approximation: This is an estimate, not an exact figure.
• Other Uses: Can also show how long it takes for money to lose half its value due to inflation.

Benefits of the Rule of 72

• Easy to Use: Quick and straightforward for investors.
• Flexible: Can be applied to various financial scenarios, like population or GDP growth.
• Investment Strategy: Helps plan when to sell for a 2:1 profit.
• Risk Management: Allows for adjustments to your strategy based on estimated growth.

Rs 5 Lakh Investment at 8% Interest Rate

• According to the Rule of 72, a Rs 5 lakh investment at an 8% annual return will grow to Rs 10 lakh in about 9 years.
• For investments, compounding will similarly double your money in around 9 years.