The rule of 72 is a great shortcut mental math tool to tell you approximately how much return you need to double your money in ‘x’ years.
Rule of 72
Annual rate of return you earn on your investments = 72 / No. of years to double
So next time a banker or a financial advisor says he can double your money in 10 years – you know he’s just giving you an annual return of approx. 7.2% p.a. which hardly beats inflation.
You can also use the above formula to know how long will it take to double your money if you’re earning x% interest p.a.
Hence, you can easily make Rs. 1 lakh – sixteen times in 24 years if you invest it for 12% p.a.. Applying the rule of 72, you will double the money every 6 years ! Below is the calculation for your reference –
Age 22 – Rs. 1,00,000
Age 28 – Rs. 2,00,000
Age 34 – Rs. 4,00,000
Age 40 – Rs. 8,00,000
Age 46 – Rs. 16,00,000