Explained: Want to know how long your investment will take to double? Use Rule of 72

The Rule of 72 is a simple method used to estimate how many years an investment will take to double in value at a given rate of return. It provides a quick way for investors to understand how long their money may take to grow to twice its original value.This Rule of 72 provides a reasonably accurate estimate, particularly when used with lower rates of return. It is mainly useful for investments that earn compound interest, while it is less suitable for investments based on simple interest.Rule 72 is considered as a good educational tool that helps investors to know about the impact of compounding on their wealth.Also Read |NFO Insight : ICICI Prudential Contra Fund opens for subscription. Is contra investing suited for current market conditions?It is known that inflation reduces the purchasing power of money over time. The Rule of 72 also helps in calculating the effect of inflation on the investments. This method helps in calculating how much time it will take for a portfolio to double investments due to inflation.How to calculate using Rule 72? Divide the rate of return by 72. For example, an investor invested Rs 2 lakh and around 9% rate of return is offered.Rule 72 = 72/rWhere r is rate of returnTherefore, Rule 72 = 72/9= 8 yearsThis indicates that it will take 8 years to double the investment.The below mentioned helps you in determining how many years will it take to double your investments with different rate of return134651848Also Read |73% equity mutual funds lost money on lumpsum investments over last 2 years. Is your fund among them?Alternatively Rule 72 can also be used to determine the rate of return. It means that it will help an investor to know the rate of return at which they will be able to double their investment.Rule 72 = 72/tWhere t is duration of timeFor example, if an investor wants to double their investment in 4 years, then what will be the rate of return?Rule 72 = 72/4= 18%This indicates that if an investor wants to double the investment in four years, then they will earn an 18% rate of return.The below mentioned table helps you in determining what rate of return you will earn at different time periods134651840(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)If you have any mutual fund queries, message ET Mutual Funds on Facebook/Twitter. We will get them answered by our panel of experts. Do share your questions at [email protected] along with your age, risk profile, and Twitter handle.