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How to Double Your Money: Rule of 72

How to Double Your Money: Rule of 72

The Rule of 72

Let’s discuss basic personal finance concepts which you can use in your personal financial planning.

One of the basic concepts is the Rule of 72.

What is the Rule of 72?

It is used to estimate how long it will take for your money to double at a certain interest rate.

For example, supposed your money earns 6% per year, how long do you think it will double? You divide 72 by 6 (72 / 6) = 12. It will take 12 years for your money to double.

Supposed you want to know the required interest rate to double your money in 5 years, we need to reverse the computation: It’s like you’re solving for x:

72x = 5

72 / 5 = 14.4%

This means that in 5 years, you need to find an investment that earns you 14.4% per annum.

Are there investments that can help me double or triple my money?

There were bank offerings in the past which promised to double or triple your money in a certain amount of time if you invest an x amount. Some banks which offered these products have folded and declared themselves bankrupt.

But to answer the question, yes, there are investments (legit, I should say) which can help you double your money. However, the returns are not guaranteed. You can try investing in mutual funds and stocks, but the risk is high.

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