Money Guru: Whenever we invest our money in any scheme, we definitely think that in how much time the amount will double. What is the easy opportunity to double the money? To decode this it is necessary to understand the rule of 72. But what is Rule 72? How does it work? Swati Raina discussed this with Amit, Founder of Amitkukreja.com on the popular TV show ‘Money Guru’.
Rule of 72
The expert Kukreja said that the Rule of 72 is an accurate formula that tells when will the money get double. Through this, it is easy to decide in how many years the investment will double. In this formula, the interest rate is calculated by dividing it by 72. This formula is considered more effective in the range of interest rates up to 6%-10%. Even calculations can be done easily on the fingers, he said.
Example – How to apply Rule of 72
As an example, let’s think someone has invested in a scheme, which gives an annual return of 14%. Then according to Rule 72, the person will have to divide 72 by 14. 72/14 = 5.14 years, which means, the money invested in this scheme will double in 5.14 years.
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Investment Return Double (in years)
Mutual Funds 14% 5.14 Years
FD 5.5% 13 years
Savings Account 4% 18 Years
Rule of 69
The law of 69 also states the amount of time in which the investment will double. But the expert believes that the Rule of 69 gives a more accurate calculation than the Rule of 72.
Example – How to apply Rule of 69
As an example, let’s think someone has invested in a scheme, which gives an annual return of 10%. Then according to Rule 69, the person will have to divide 69 by 10 and then add 0.35. 69/10 + 0.35 = 7.25 years, which means, the money invested in this scheme will double in 7.25 years.
Investment Return Double (in years)
Mutual Funds 14% 5.27 Years
FD 5.5% 12.89 years
Savings account 4% 17.6 years
