When it comes to investing, everyone dreams of growing their wealth steadily over time. But
have you ever wondered how long it will take for your money to actually double? While financial
calculators and apps can give precise answers, there’s a simple rule of thumb that has guided
investors for decades — the Rule of 72.
This straightforward formula is more than just a math trick. It’s a practical way to understand the
power of compounding and how different rates of return can shape your financial journey. If
you’re serious about investing, mastering this rule can give you the confidence to make smarter
choices and build real wealth.
What Is the Rule of 72?
The Rule of 72 is a quick formula that estimates how many years it will take for your investment
to double at a given annual return.
Formula:
Years to Double = 72 ÷ Annual Return (%)
For example, if your portfolio earns 9% per year, it will double in roughly:
72 ÷ 9 = 8 years.
That means ₹10 lakhs invested today could become ₹20 lakhs in just 8 years — and if you keep
it invested, ₹40 lakhs in 16 years, and ₹80 lakhs in 24 years.
That’s the magic of compounding.
Why It Matters for Investors
Investing isn’t just about chasing returns — it’s about understanding the relationship between
time and growth. The Rule of 72 makes this clear by helping you see how different investment
strategies can shape your wealth.
Here’s how it can help you:
1. Comparing Investment Options
Suppose a fixed deposit gives you 6% annually, while an equity mutual fund averages 12%.
● At 6%: Your money doubles in 12 years.
● At 12%: Your money doubles in just 6 years.
That’s the difference between average growth and wealth creation.
2. Setting Long-Term Goals
If your goal is to retire with ₹2 crores and you’re starting with ₹50 lakhs, you’ll need your money
to double twice. The Rule of 72 lets you estimate how long it will take at different returns, so you
can set realistic timelines.
3. Power of Early Investing
The rule highlights why starting early is the biggest advantage. A 25-year-old investing in
equities at 12% can see their money double roughly every 6 years, giving them multiple cycles
of compounding before retirement. Someone starting at 40, on the other hand, has fewer
doubling opportunities.
4. Inflation Awareness
While investing grows wealth, inflation eats into purchasing power. If inflation averages 6%, your
money’s value halves in about 12 years. This means your investments must grow faster than
inflation to truly build wealth.
Building Wealth With the Rule of 72
Let’s look at a simple example:
- You invest ₹5 lakhs in a mutual fund that earns an average of 12% annually.
- Using the Rule of 72, your money doubles every 6 years.
Here’s how it grows: - Year 6 → ₹10 lakhs
- Year 12 → ₹20 lakhs
- Year 18 → ₹40 lakhs
- Year 24 → ₹80 lakhs
Without adding anything more, your ₹5 lakhs becomes ₹80 lakhs in 24 years. If you keep
investing regularly through SIPs, the effect is even greater.
Limitations to Keep in Mind
Of course, the Rule of 72 is an approximation. Real investment returns fluctuate, and markets
can be volatile in the short term. The rule works best for annual returns between 6% and 12%,
which is where most long-term investment products like mutual funds, index funds, or diversified
equity portfolios usually fall.
Think of it not as a precise prediction, but as a planning tool that helps you visualize long-term
growth.
Final Thoughts
The Rule of 72 is one of the simplest yet most powerful concepts every investor should know. It
helps you compare investment options, plan your goals, and most importantly, appreciate the
power of compounding.
Wealth is not built overnight — it’s built by consistently investing, staying disciplined, and letting
time do its work. The Rule of 72 is your shortcut to understanding how fast that journey can be.
So next time you’re considering where to invest, ask yourself: How quickly will this help me
double my wealth? The answer, thanks to the Rule of 72, is only a quick calculation away.
Disclaimer: The information provided in this infographic is for educational purposes only and should not be considered as financial advice. We recommend consulting a certified financial professional before making any major financial decisions. Omega Financial is not liable for any decisions made based on this material.
Investment in the equity market and securities is subject to market risk; read all the scheme-related documents carefully.
