Know how the Rule of 72 applies to investment growth with a 12% annual return. At this rate, your lump sum investment will double in roughly 6 years. For instance, an investment of Rs 6 lakh would grow to Rs 12 lakh in that time, thanks to the power of compounding. This simple calculation tool provides a quick way to gauge how your money can grow, helping you plan and optimize your financial strategy for improved returns.
Revealing the Rule of 72: How long will it take your investment of Rs 6 lakh to turn into Rs 12 lakh with 12% return
Understand how the Rule of 72 works with a 12% annual return, allowing your Rs 6 lakh investment to double in 6 years. Use this quick tool to plan and enhance your financial strategy.
ZeeBiz WebTeam | Sep 10, 2024, 01:56 PM IST
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What is the Rule of 72?
The Rule of 72 is a financial formula used to estimate the time it takes for an investment to double based on a fixed annual rate of return. Simply divide 72 by the expected annual return rate, and you’ll have a rough estimate of how long it will take for your investment to grow twofold.
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Key Uses of the Rule of 72
Estimate Investment Growth: The Rule of 72 provides a simple way to estimate when your investment will double in value.
Quick Financial Calculation: This tool offers a fast calculation method to assess whether you're on track with your investment goals.
Close Approximation: While not exact, the Rule of 72 gives a near-accurate estimate of investment growth, making it a handy financial planning tool.
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Understanding the Rule of 72 in Depth
How It Works
The Rule of 72 allows you to estimate how long it will take for your money to double with a fixed interest rate. It's not just for investments—this rule can also be used to calculate how inflation reduces the purchasing power of your money over time.
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Formula
T ≈ 72 ÷ R
- T = Time to double the investment
- R = Annual interest rate (%)
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Limitations
The Rule of 72 is most accurate for interest rates close to 8%. When interest rates deviate significantly from this, the estimate becomes less precise.
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How long will it take for a Rs 6 lakh investment to double?
For a Rs 6 lakh lump sum investment with a 12 per cent annualised return, the duration to double your amount will be approximately 6 years, allowing you to maximise your returns and meet your financial goals efficiently.
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what will be the doubled amount?
The doubled amount will be around Rs 11,99,952 based on the Rule of 72.