Rule of 72: At Rs 10,000/month, how long will your investment double with 12% return?
Learn how the Rule of 72 helps estimate the growth of your investments at a 12% annual return. Typically, a lump sum investment doubles in about 6 years with this rate. For a Rs 10,000 monthly contribution, compounding accelerates growth, helping it turn double. This rule serves as a quick tool for visualising investment growth over time, assisting in effective financial planning. Read.
The Rule of 72 is a powerful tool for estimating how long it takes for an investment to double, especially with regular contributions. With a 12% annual return, a Rs 10,000 monthly investment can grow significantly over time. This formula simplifies understanding compounding growth, providing an easy way to track financial goals. Whether you’re saving for the future or planning investments, knowing when your contributions will double helps in optimizing strategies for better returns and overall financial health.
What is the Rule of 72?
A simple formula used to estimate how long it will take for an investment to double based on a fixed annual return rate. To calculate, divide 72 by the annual rate of return.
Key Uses of the Rule of 72
Estimate Investment Growth
Predicts when your investment will double.
Simple Calculation
Easy way to track financial progress.
Approximations
Offers a close estimate for growth but is not exact.
Other Applications
Useful for estimating how long it takes for value to halve due to inflation.
Benefits of the Rule of 72
Ease of Use
Provides a quick calculation for investors.
Flexible Application
Useful for factors like GDP or population growth.
Investment Strategy:
Helps investors decide when to sell for a 2:1 return.
Risk Management
Adjusts growth expectations in line with market conditions.
How long will it take a Rs 10,000 monthly investment to double with a 12% return?
Using the Rule of 72, it would take around 6 years for the Rs 10,000 monthly investment to double, reaching a value of approximately Rs 20,000 per month over that time. The compounding effect from monthly contributions accelerates this growth.