




The Rule of 72 provides a wonderful illustration of the magic of compounding. To quikly approximate how many years
are required to double the value of an investment, simply divide the rate of return into 72: a 4 percent return takes
about 18 years; 6 percent, 12 years;10 percent, 7 plus years; and so on.
The following table shows how quickly money grows over various time periods at various at various rates.
Note how the reward of higher return increases over time. At 4 percent, it takes 72 yeara very long time horizon
for the original investment to multiply 16fold. But at 12 percent, it takes 24 years, only onethird the time,to grow
16fold . After some 30 years, the investment compounding at 12 percent annually multiplies 32 times over, a multiple
that the 4 percent rate would not reach until 90 years has elapsed. 

More Magic 
The Rule of 72 also works in another useful way for investors putting money away today so that they can
receive income tomorrow. For any given rate of return, the Rule of 72 shows how many years you must regularly
invest a given sum before you can stop investing and then start withdrawing the same amount without depleting
your capital.
For example, if you invest Rs 1500 per month at a 6 percent rate of return, after 12 years (72 divided by 6)
you could regularly withdraw Rs1500 per month and still leave your principal untouched. After 24 years, you could
begin to make withdrawls of Rs.4500 per month. After 36 years, you could withdraw Rs10500 per month, and still
preserve principal. But if your rate of return were 12 percent, your waiting time would be shorter: six years to
begin Rs 1500 monthly withdrawals, 12 years for Rs 4500, and 18 years for Rs 10500. After 24 years, you could withdraw
Rs. 22500 per month without impairing your principalfully five times the amount possible at the 6 percent rate of return. 

Using the Rule of 72 
Compound Rate 18 
2 Times 
4 Times 
8 Times 
16 Times 
32 Times 
4% 
18 Years 
36 Years 
54 Years 
72 Years 
90 Years 
6% 
12 Years 
24 Years 
36 Years 
48 Years 
60 Years 
8% 
09 Years 
18 Years 
27 Years 
36 Years 
45 Years 
10% 
07 Years 
14 Years 
21 Years 
28 Years 
35 Years 
12% 
06 Years 
12 Years 
18 Years 
24 Years 
30 Years 




