What is the Rule of 72?
The Rule of 72 is a simple, powerful formula used to estimate how long it will take for an investment to double in value at a fixed annual rate of return. By dividing 72 by your expected annual return, you get an approximation of the number of years needed to double your money.
For example, if you invest ₹1 lakh in a mutual fund that returns 12% annually, your money will double to ₹2 lakhs in approximately 6 years (72 ÷ 12 = 6). This rule works remarkably well for interest rates between 6% and 20%, making it an invaluable tool for quick investment calculations.
Why is it Called the Rule of 72?
The number 72 is used because it has many small divisors (1, 2, 3, 4, 6, 8, 9, 12), making mental math easier. While the mathematically precise number is closer to 69.3 (from ln(2)), 72 provides better accuracy for typical investment returns and is easier to calculate mentally.
How the Rule of 72 Works
The Rule of 72 is based on the natural logarithm of 2 (approximately 0.693), which governs exponential growth. When you compound interest, your investment grows exponentially rather than linearly. The formula approximates the exact calculation:
Simple Rule of 72
Years to Double = 72 ÷ Annual Return (%)
Exact Formula
Years to Double = ln(2) ÷ ln(1 + r)
Our calculator shows both approximations so you can see how close the Rule of 72 comes to the mathematically exact answer. For most practical investment scenarios (returns between 6-20%), the Rule of 72 is within 3% accuracy.
Practical Examples of the Rule of 72
Indian Investment Scenarios
Fixed Deposit (6% return)
72 ÷ 6 = 12 years to double
₹10 lakhs becomes ₹20 lakhs in 12 years
Balanced Mutual Fund (10% return)
72 ÷ 10 = 7.2 years to double
₹5 lakhs becomes ₹10 lakhs in ~7 years
Equity Mutual Fund (12% return)
72 ÷ 12 = 6 years to double
₹1 lakh becomes ₹2 lakhs in 6 years
High Growth Stock (15% return)
72 ÷ 15 = 4.8 years to double
₹50,000 becomes ₹1 lakh in under 5 years
The Power of Compounding
The Rule of 72 beautifully demonstrates compound interest. If your ₹1 lakh doubles every 6 years at 12% return:
- Year 0: ₹1,00,000 (1x)
- Year 6: ₹2,00,000 (2x)
- Year 12: ₹4,00,000 (4x)
- Year 18: ₹8,00,000 (8x)
- Year 24: ₹16,00,000 (16x)
This exponential growth is why starting early is so crucial for wealth building!
Advanced Applications of the Rule of 72
1. Calculating Required Return
You can reverse the formula to find what return you need. Want to double your money in 8 years? 72 ÷ 8 = 9% annual return required.
2. Evaluating Investment Options
Quickly compare different investment opportunities:
- PPF (7.1% return): Doubles in ~10 years
- NPS (Moderate risk, 10%): Doubles in ~7.2 years
- Index Funds (12%): Doubles in 6 years
- Small-cap Funds (15%): Doubles in 4.8 years (higher risk)
3. Understanding Inflation Impact
Use the Rule of 72 in reverse to understand inflation. At 6% inflation, your purchasing power halves in 12 years. This is why investing is crucial - your money must grow faster than inflation!
4. Goal Planning
Want ₹1 crore for retirement in 18 years? You need to start with ₹12.5 lakhs at 12% return (doubles 3 times: 12.5L → 25L → 50L → 1Cr).
How to Use This Rule of 72 Calculator
- 1 Enter Interest Rate: Slide the interest rate slider to your expected annual return (6% for FD, 12% for equity, 15% for aggressive growth)
- 2 Set Initial Amount: Enter how much you're starting with (₹10K to ₹1 Crore)
- 3 Choose Doublings: Select how many times you want to see your money double (up to 6 times!)
- 4 Watch the Animation: See the cell division animation showing exponential growth visually
- 5 View Charts: Analyze the timeline chart (logarithmic scale) and comparison chart across different rates
Formula Used
Years to Double = 72 / Annual Interest Rate (%)
A quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return.
Key Insights
- Formula: 72 / Interest Rate = Years to Double
- Works best for interest rates between 6% and 10%
- For higher rates, Rule of 69.3 is more precise
? Understanding the Rule of 72
What is the Rule of 72?
The Rule of 72 is a quick mental math shortcut to estimate how long it takes for an investment to double. Simply divide 72 by the annual interest rate. At 12% return, 72₹12 = 6 years to double. It's remarkably accurate for rates between 6-20%.
Why does the cell division animation help?
Compound interest is often called "exponential growth" - the same pattern as cell division. 1 becomes 2, 2 becomes 4, 4 becomes 8. This visualization makes the abstract concept of compounding tangible and memorable.
How accurate is the Rule of 72?
It's within 3% accuracy for rates between 6-20%. For very low or high rates, Rule of 69.3 or Rule of 70 may be more accurate. The exact formula is: Years = ln(2) / ln(1+r), which this calculator also shows.