"THE RULE OF 70" | G Bajpai & Associates

Ever wondered how much time will it take for your investment to double at a specified rate of return?

Forget complex mathematical formulas, you can calculate it in 2 simple steps using - 

            "THE RULE OF 70"

Let's understand how-

• The Rule Of 70 - what it is?

- The rule of 70 is a simple mathematical formula that can be used to approximate how long it takes for an investment to double in value, given a specified rate of return.


- Investors typically use the rule of 70 to compare investments with different annual interest rates. 

This makes it simple for investors to figure out how long it may be before they see similar returns on their money from each of the investments.


• The Rule of 70 - How to calculate?

- Obtain the annual rate of return or growth rate on the investment 

- Divide 70 by the annual rate of growth or yield.


• The Rule Of 70 - Examples:

- At a 3% growth rate, it’ll take 23.3 years for an investment to double because 70/3=23.33 years.

- At a 5% growth rate, it’ll take 14 years for an investment to double because 70/5=14 years.

- Similarly, it will take an investment about 8.75 years, 7 years and  5.8 years to double, given the annual rate of interest is 8%,10% and 12% respectively.


•The Rule of 70 -Limitations 

- It only provides a rough idea on doubling time.

- Additionally, the rule is most effective if the current growth rate is consistently the same. If growth rates or annual interest rates change in any way, it will not generate an accurate estimate.


•Rules of 72 and 69

- In some instances, the rule of 72 or the rule of 69 is used. The function is the same as the rule of 70 but uses the number 72 or 69, respectively, in place of 70 in the calculations.

- While the rule of 69 is often considered more accurate when addressing continuous compounding processes, 72 may be more accurate for less frequent compounding intervals. 

For more information contact us: +919415912987

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