What is the Rule of 72? A simple formula to estimate how long it takes for an investment to double, based on a fixed annual return rate.
How to Calculate Using the Rule of 72? Divide 72 by the annual rate of return to get an approximate time frame in years for your investment to double.
Why Use the Rule of 72? It’s a quick, easy method to assess whether your investment is growing at the desired rate, helping you plan financial goals.
Limitations of the Rule The Rule of 72 is most accurate when the interest rate is close to 8%. It's less precise for much higher or lower rates.
Practical Example For a Rs 5,000 monthly investment growing at 12% annually, the amount will approximately turn into Rs 5.16 lakh after about 6 years.
Formula Explained T ≈ 72 ÷ R Where T is time in years, and R is the annual rate of return in percentage.
Estimating Loss with Inflation Just as the Rule of 72 helps predict growth, it can also calculate how quickly inflation will erode the value of money.
SIP Strategy for Rs 5,000 Monthly Investment A systematic investment of Rs 5,000 per month at a 12% annual return will grow over Rs 5 lakh due to compounding, approximately in 6 years.