Whenever it comes to investing, people invest in popular schemes of banks, post offices, government bonds, stock markets, mutual funds. Most of the people want to make a safe investment, which gives guaranteed returns. But in the real sense, before investing anywhere, you must do this calculation that where and in how much time your money is doubling, treble or quadrupling. In such a situation, Rule of 72 can be very useful for you.
Know what is the Rule of 72 Rule of 72 is considered very important from investment point of view. Most of the experts consider this to be a precise formula, through which it is decided that in how many days your investment will double. To know how much interest you will get annually in a scheme, you have to divide that interest by 72. This lets you know how much time your money will double.
Understand by example
You must have seen that many people keep their deposits lying in the bank account because they believe that annual interest will continue to be earned on it. But only 4 percent interest is available on the savings account. If we divide 72 by 4, the sum of 18 will come out i.e. in 18 years your money will be double. On the other hand, if we talk about fixed deposits, then the interest is 5 to 6 percent. Similarly, State Bank of India’s 10-year fixed deposit has an interest rate of 5.40%. In such a situation, in 72/5.40=13.33 years, that is, in 13.33 years, your amount will double.
It will be easier to choose the best scheme On the basis of this formula, you can understand which scheme is better for you. As explained to you in the example, fixed deposit is a better option as compared to savings account. Similarly, if you are investing in any other scheme, then compare it with other schemes using this formula. This will give you an idea of which scheme can give you double the money in how much time. In most cases, this rule gives an almost accurate figure. However, there may be a slight difference in the result.
