Sunday, 5 January 2014

Rule 72 : Double your money


Definition:
A rule stating that in order to find the number of years required to double your money at a given interest rate.
You divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.

How to Use the Rule of 72:
To estimate how long it takes for your money to double, simply divide 72 by the interest rate. The result is how many years it will take for your money to double at that rate. For example, let’s assume you can earn a 6% rate of return. How long will it take 1,000 INR to grow into 2,000 INR?

 72 / 6 percent = 12 years (Quite long time).

*Remember it just estimates. Depending on changes in the rate of return over time, what you’re invested in, how you invest it, how interest is applied, and possible tax implications, the actual amount of time needed to double your money will vary.

Is your investment worth your money?
Ask this simple question to you before investing. If you put money at rate of return 8% in FD so as per Rule 72 it will take approx. 9 year to double.

Indian stocks have historical return of around 15% so as per Rule 72 it take just 4.8 year to double.

So choice is yours.
 Be smart. Invest smartly.