The Rule of 72 (or is it 69 or 70)

This 72 is such a great number that it gives answers to the often asked questions such as:

1. I have saved my first one thousand Rupees now. How long will it take me to double it?
2. If my investment is giving me a 8 percent return, when will it become double?
3. This bond promises a 100 percent return in 12 years. Shall I invest? What return does it give?

I don't know who discovered this important property of 72 first, but I have found it to be a very good 'Rule of thumb' to apply to answer questions like the above!

Then what is this rule? Put simply it is a rule which gives (1) the number of years needed to double the money if the interest rate (RoI) is known or (2) the RoI needed to double the money if the period of investment is known. All that you need is to remember that the interest rate (RoI) when multiplied by years is about 72. For example, if the RoI is 12%, the period needed (to double) is 72 divided by 12 or 6 years. If the RoI is 6%, the period will be 72 divided by 6 or 12 years. Luckily 72 is such a nice, factorable number that it is divisible by 2, 3, 4, 6, 8, 9, 12, 18 etc. Now on, you will know that if you invest money at 24% p.a., it should take about 3 years to double, or at 18%, it will take 4 years. But please remember this is an empirical rule which has been found to apply in most situations and has no accurate mathematical logic. So as the years or the RoI increase, the results are only approximate. Usually upto 12 years or 12 % RoI, it works very well. Do try it.

Wikipedia mentions about a rule of 69 or 70 as more accurate, but personally I prefer the rule of 72 for the adorable factorability of 72!!

Happy investing!

Madhusudan