Rule of 72

The Rule of 72 is a simple formula used to estimate how long it will take for an investment to double in value based on a fixed annual rate of return. The rule states that you can divide 72 by the annual interest rate (expressed as a percentage) to get an approximation of the number of years it will take for your investment to double.

Read more
kapil-sharma
Bajaj allianz life insurance
loading...
ICICI Prudential Life Insurance Company
loading...
tata aia life insurance
loading...
Investment Plans
  • money
    Generate wealth Earn 1 Cr# in maturity with Zero LTCG tax
  • tax
    Double tax savings^ On premiums (under 80C) and on maturity (under 10(10D))
  • compare
    Compare & Choose 30+ Plans and 150+ Fund options
We are rated++
rating
9.7 Crore
Registered Consumer
51
Insurance Partners
4.9 Crore
Policies Sold

Top performing plans˜ with High Returns**

Invest ₹10K/month & Get ₹1 Crore# on Maturity

+91
Secure
We don’t spam
Please wait. We Are Processing..
Your personal information is secure with us
By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated++
rating
9.7 Crore
Registered Consumer
51
Insurance Partners
4.9 Crore
Policies Sold
Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

What is Rule of 72?

The Rule of 72 is a simple mathematical formula used to estimate how long it will take for an investment to double at a given interest rate. It is a useful tool for understanding the power of compound interest and making informed financial decisions.

How Does the Rule of 72 Work?

To use the Rule of 72, simply divide 72 by the annual interest rate (expressed as a percentage). The result is the approximate number of years it will take for your investment to double.

Formula:

  • Time to double = 72 / Interest rate

Example:

Suppose you invest â‚ą10,000. The interest rate of fixed deposit is 8% interest per year, compounded annually. To estimate how long it will take for your investment to double, you can apply the Rule of 72:

  • Time to double = 72 / 8 = 9 years

According to the Rule of 72, your investment of â‚ą10,000 will approximately double in 9 years, reaching a value of around â‚ą20,000.

Rule of 72 Formula

Below is the Rule of 72 formula: 

Doubling Time = 72 / Interest Rate (%)

Where:

  • Doubling Time: The approximate number of years it takes for an investment to double in value.

  • Interest Rate: The annual interest rate of the investment, expressed as a percentage.

What are the Advantages and Disadvantages of Rule of 72?

Below are the advantages and disadvantages of Rule of 72: 

  1. Advantages

    The Rule of 72 is a valuable tool for understanding the power of compound interest. Here are some of its key advantages:

    • It's a straightforward calculation that can be done mentally.

    • Provides a quick approximation of doubling time.

    • Applicable to various investment scenarios, including GDP, population growth, and more.

    • Helps set realistic expectations for investment goals.

    • It can be used to evaluate the potential returns of different investment options.

  2. Disadvantages

    While the Rule of 72 is a useful tool, it's important to be aware of its limitations:

    • The accuracy of the Rule of 72 decreases as interest rates deviate significantly from 6-10%.

    • It's an estimate, not an exact calculation.

    • The rule becomes less reliable if interest rates fluctuate.

    • Not suitable for investments with changing interest rates or simple interest.

What is the Difference Between the Rule of 72 and Rule of 70? 

The choice of 72 or 70 is based on the natural logarithm of 2, which is approximately 0.693147. The Rule of 72 is a slight approximation to this value, while the Rule of 70 is a closer approximation.

In practice: For most everyday investment scenarios, the difference between the Rule of 72 and the Rule of 70 is negligible. Both provide a quick and easy way to estimate doubling time. However, for more precise calculations or for very low interest rates, the Rule of 70 might be slightly more accurate.

What are the Different Uses of the Rule of 72?

Below are the different uses of 72 Rule Investing:

  • Investments: Calculate how long it takes for your money to double at a given interest rate.

  • GDP: Estimate how long it takes for a country's economy to double in size.

  • Population: Calculate how long it takes for a population to double.

  • Inflation: Estimate how long it takes for prices to double due to inflation.

Conclusion

The Rule of 72 is a valuable formula that provides a quick and easy way to estimate the doubling time of an investment. By understanding how long it takes for your investments to double, you can make more informed financial decisions and set realistic goals for your savings and retirement planning.

FAQs

  • Does the Rule of 72 work for stocks?

    Stocks do not have a fixed rate of return, so you cannot directly use the Rule of 72 to determine how long it will take to double your money. However, you can use it to estimate the average annual return required to double your money within a specific time frame. To do this, divide 72 by the number of years you want to take to double your money. For example, if you want to double your money in eight years, divide 72 by eight, which results in an average annual return of 9%.
  • What 3 things can the Rule of 72 determine?

    The Rule of 72 can help you determine three things:
    • The time it will take to double your money: Divide 72 by your expected annual return rate.

    • The return needed to double your money in a fixed period: Divide 72 by the number of years you have in mind.

    • How long it will take to quadruple your money: Simply double the time it takes to double your money. For example, if it takes seven years to double, it will take 14 years to quadruple.

  • Where is the Rule of 72 most accurate?

    The Rule of 72 is most accurate for rates of return between 5% and 10%. Outside this range, the estimate becomes less precise. When the rate of return is either significantly lower or higher, the Rule of 72's accuracy diminishes.

˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-02-2025

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).

Become a crorepati-1
Invest More Get More!
You Get
₹1 Crores*
You Invest
₹10K/month
You Get
₹80 Lakhs*
You Invest
₹8K/month
You Get
₹50 Lakhs*
You Invest
₹5K/month
capital guarantee
Investment Calculator
  • One time
  • Monthly
/ Year
Sensex has given 10% return from 2010 - 2020
You invest
You get
View plans

Investment plans articles

Recent Articles
Popular Articles
Haryana Government Schemes

17 Feb 2025

The Haryana government runs various schemes to support farmers,
Read more
Government Schemes for Housewives

17 Feb 2025

The Indian government offers various schemes to empower
Read more
Government Personal Loan Schemes

17 Feb 2025

Government personal loan schemes offer a reliable financial
Read more
Maharashtra Government Schemes

17 Feb 2025

The Maharashtra government offers various schemes to support
Read more
Bank of Baroda PPF Account

10 Feb 2025

A Bank of Baroda PPF Account is a secure and long-term
Read more
30 Best Investment Options in India in 2025
  • 04 Apr 2014
  • 1876036
In India, there are many safe and reliable options to grow your money with minimal risk. Whether you are new to
Read more
Short Term Investments Options
  • 10 Feb 2014
  • 548860
Short-term investments are financial assets that can be easily converted to cash within a short period, ranging
Read more
Post Office Senior Citizen Savings Scheme (SCSS) 2025
  • 13 Feb 2020
  • 110705
The Post Office Senior Citizen Savings Scheme (SCSS) is a government-backed scheme designed specifically for
Read more
Best Saving Plans in India 2025
  • 30 Jan 2019
  • 168239
Saving money is an important step towards achieving financial independence and security. Whether you're looking
Read more
Government Schemes to Invest in India in the Year 2025
  • 23 Dec 2021
  • 18931
India offers a diverse landscape for financial planning, and for those seeking stability and security, government
Read more

top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL