The rule of 72 is used as rule of thumb for estimating an investment’s doubling time.
The formula of Rule of 72 is
T = 72/r
Where
r = rate of interest / year
T = number of periods required to double an investment’s value
For example, we want to know what is the time required to double investment @ 6% rate of interest.
It will take 12 years ( T = 72 / 6) to double the interest.
So, next time someone asks you to tell how much time an investment at a certain rate of interest takes to double your money, use of Rule of 72 can be a quick handy tool and you do not need our calculator or laptop.
It may be noted that Rule of 72 & other variations i.e. the rule of 70 and the rule of 69.3 gives approximate time an investment takes to double the investment.
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