Rule 72 requires one to divide 72 by the rate of interest at which one is investing. This will give the number of years that an invested amount will take to double.
The rule is mainly for the investors who stay invested for a long-term period.
Suppose an investor wanted to invest Rs 1 lakh with an interest rate of 6%, then the money invested will grow to Rs 4 lakh in 24 years. So to check the number of years, just divide 144 by the interest rate of the product.
Also Read | Buy-the-dip didn’t work for mutual fund investors on election result day due to ‘tech glitch’If an investor is investing Rs 1 lakh with an expected rate of return of 10% per annum, thenRule 144 = 144/ rate of return
=144/10
= 14.4 years
This indicates that the investment will take 14.4 years to quadruple or become Rs 4 lakh at an interest rate of 10%.
The below table helps an investor in determining how many years it will take to quadruple their investments.
ET OnlineSuppose an investor wants the investment to quadruple in 6 years, then
The rate of return = 144/time period
=144/6
= 24%
This shows that to quadruple your investment in 6 years, the rate of return has to be 24%.
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The below table shows what rate of return you will earn at different time periods.
ET OnlineThis rule applies to investors who stay invested for a longer horizon in order to watch their money grow four times.
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