The Magic of 72 – Vaidy’s Lesson in Wealth
Doubling
Inside the Bharadhwaj Investsmart office, the
morning was just warming up. The team - Jagruti, Manoj, Prajakta, Dhawal,
Pooja, Sunil, and Tabassum - had gathered in the breakout corner for their
usual financial chit-chat over chai. That’s when Vaidy, the ever-curious super
boss, decided to turn it into a masterclass.
“Let me ask you all a simple question,” Vaidy began. “If your
client invests ₹1 lakh in an instrument that gives a return of 9% per annum,
how long will it take to double?”
Sunil sipped his tea thoughtfully. “Hmm... maybe 8 or 9
years?”
“Close enough,” Vaidy smiled. “But there’s a quicker way to
find out - without a calculator or Excel. It’s called the Rule of 72.
And today, we’re going to understand not just the rule, but also how to apply
it.”
1. What is the Rule of 72?
Vaidy wrote it on the whiteboard:
Time to Double = 72 ÷ Interest Rate
“It’s a mental math shortcut,” he explained. “Divide 72 by the
annual return rate, and you get the number of years it takes for your money to
double.”
“So for 9%?” asked Prajakta.
“72 ÷ 9 = 8 years. That’s it!” he replied.
2. It Helps Explain Power of Compounding Easily
Dhawal leaned in. “But we already explain compounding to
clients, right?”
“Yes,” Vaidy nodded. “But this rule makes it click
instantly. If a client invests at 6%, money doubles in 12 years. But at 12%, it
doubles in just 6. It’s intuitive. They can ‘feel’ the compounding.”
3. It Makes You Think About Inflation Too
“Now reverse the logic,” said Vaidy. “Say inflation is 6%.
Your purchasing power halves in 12 years.”
Pooja’s eyes widened. “That’s scary. We always talk about
returns - but not enough about how inflation erodes wealth.”
“Exactly,” Vaidy agreed. “This rule isn’t just about doubling
- it’s about shrinking, too. A 4% FD and 6% inflation? You’re actually
going backwards.”
4. It Highlights the Cost of Delayed Investing
Manoj jumped in. “So, if someone delays investing by 6 years
in a 12% scheme, they’re losing one doubling cycle?”
“Bingo,” Vaidy beamed. “Let’s say a 30-year-old starts at 12%.
₹1 lakh becomes ₹2 lakh at 36, ₹4 lakh at 42, ₹8 lakh at 48, and ₹16 lakh by
54. But if they start at 36? They only get ₹8 lakh by 54. That’s the cost of
delay.”
5. It Works Best with Realistic Expectations
Tabassum raised a hand. “But should we always expect 12%
returns?”
“No,” said Vaidy, “and that’s the point. Use the Rule of 72 to
manage expectations. If you expect 15% annually, your money doubles in
under 5 years - but you better be in high-risk territory. For equity SIPs, we
guide clients with 10 - 12% long-term estimates.”
The team nodded, each silently doing their own mental
calculations.
Vaidy concluded, “The Rule of 72 is not a financial formula - it’s
a conversation starter. It simplifies investing and makes you think
about time, returns, inflation, and decisions.”
As the team dispersed, Jagruti whispered to Manoj, “I’m going
home tonight and checking how many doubling cycles I have left.”
Manoj grinned. “Me too. This 72 is magical.”
The content made available in this article is for general informational purposes only. While every effort has been made to ensure the accuracy and completeness of the content, it should not be considered as a substitute for professional consultation.
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