Have you ever ask yourself how long does it takes for your investment to double or give you a 100% return? Calculating an investment involving compounded interest. It is not as easy as a simple arithmetic. Most unit trust consultant and financial planner use a financial calculator to determine the value of compounding interest on investment.

However there is simple way to calculate your investment and that is by using the rule of 72. The rule of 72 help you to roughly estimate the time for your investment to double (100% return) if compounded on certain rate. So by mastering the rule of 72 it can help you to determine how good a potential investment is likely to be.

Now let see at the example:

Situation 1;

If an investment consistently gives 8% return every year how long does it take for it to double?

Ok let use the rule of 72. What you need to do is simple just divide 72 with the interest rate.

72 / 8 = 9 years

So at 8% annually your investment will need 9 years to double.

Situation 2:

If an investment can give a 100% return on 6 years, what is the annual return of that investment?

Solution :  72 / 6 = 12 %

Yup it’s that easy. Now you can try it on your investment.

Sheyzal Azman
Financial Consultant
sheyzal@yahoo.com