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Business News/ Money / Personal Finance/  The formula behind doubling your money
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The formula behind doubling your money

Schemes that offer to double your money are nothing but marketing gimmicks.
  • Calculating it is simple if you know the formula behind it.
  • The formula behind doubling your money (iStock)Premium
    The formula behind doubling your money (iStock)

    We often come across schemes that promise to double our money in a certain number of years. As much as such offers sound alluring, they are nothing but a marketing gimmick based on simple mathematics.

    Sitting at the comfort of your home, even you can calculate by when your money will double if you are aware of the Rule of 72!

    "The Rule of 72 is a rule of thumb that helps one find the approximate time it takes to double one's investment given the rate of return. For example, at 9% p.a., it should take 72/9 = 8 years (approximately) to double the money. The condition here is that the return here is compounded, which means the earning is reinvested," said Amit Trivedi, personal finance coach, author of Riding the Roller Coaster.

    To simply say, take the number 72 and divide it with the rate of return of the investment product. The number at which you will arrive is the number of years in which your money will double. For example, let’s suppose you have invested 1 lakh in a product that provides you a rate of return of 9% p.a.. Now, if you divide the number 72 by 9, you arrive at 8. That means, your 1 lakh will become 2 lakh in 8 years.

    Similar to Rule of 72, the Rule of 114 and the Rule of 144 tell you when your money will triple and grow four times respectively. The calculations are similar.

    Trivedi adds, "Such thumb rules have been arrived at through observations and it works remarkably accurately for the rate of return in the range of roughly 5% p.a. to 20% p.a."

    The good part is that with most of the investment products, the rate of return falls within this range, and hence the rule works fine.

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    ABOUT THE AUTHOR
    Sanchari Ghosh
    Sanchari Ghosh is a Chief Content Producer with LiveMint. She covers news, human interest, epidemiology and personal finance stories
    Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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    Published: 06 Dec 2020, 07:20 AM IST
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