Sep 29, 2023 1 min read

The Rule of 72 for Double Returns

The rule of 72 is a widely known concept in the investing field. Many investors use this rule to know when their money will double. Interesting right? I will explain it in the simplest of words. The formula is -

Double Returns = 72/Rate of Return.

Let's learn with an example:

If you are investing 10,000 dollars into a mutual fund that is promising you a 10% return each year. Then, in how many years will your money get doubled?

The answer is 72/10 = 7.2 years.

Your money will double in 7.2 years.

And if your rate of return is 18%, then your money will double in 4 years.

Because 72/18 = 4.

So your 10,000 dollars will become 20,000 dollars in just 4 years if you manage to invest it in a way that you're getting 18% returns!

This rule has only 2 small drawbacks. It is used to calculate only double returns and the answer you get is not 100% correct (You could be off by 2-4 months).

But I hope you get the idea and you can use this rule to get an estimate of when your money will double. For starters, think about where you can invest your money and get at least a 10% return on your investment. Then your money will double in 7.2 years as we learned above. This happens due to compound interest.

Please learn about investing and start ASAP.

I am also learning a new concept and bringing it to you each week. We are in this together.

See you next week.