Rule of 72: Simple Formula to Double Your Investment (2025)

The Power of the Rule of 72

The power of the ''Rule of 72'' is a method for determining a fixed rate of return and knowing how long it takes for an investment to double in value.

Many people are able to accumulate large capital.

But how many actually know how to double that capital?

For example, if you have RM1,000, how do you grow it to RM2,000?

RM10,000 to RM20,000?

RM100,000 to RM200,000? And so on.

Did you know that no matter how much capital we have, we always want it to double due to the factor of Time Value of Money.

Time Value of Money means the value of the money we hold today will not be the same after 5 or 10 years.

But do you know how long it takes to double that capital?

The ''Rule of 72'' has the answer.

The method is simple: divide 72 by the annual dividend or return of an investment.

EXAMPLE 1: 6% RETURN

72 divided by 6 gives a value of 12.

This means, if the annual dividend is 6%, you need 12 years to wait for your RM1,000 capital to double to RM2,000 or RM10,000 to become RM20,000.

Investment instruments that typically offer this kind of return include ASB, EPF, and Tabung Haji.

EXAMPLE 2: 15% RETURN

72 divided by 15 gives a value of 4.8.

With an annual dividend of 15%, an investor would need 4.8 years to double the capital they hold.

Instruments that can offer this kind of dividend include Unit Trusts and Property investments.

EXAMPLE 3: 30% RETURN

72 divided by 30 gives a value of 2.4.

So, an investor only needs to wait 2.4 years to double their capital from RM10,000 to RM20,000.

Returns of up to 30%, 50%, 70%, 100% or more can typically be generated in the stock market.

These high returns are precisely in line with the risk of stocks themselves — High Risk High Return.

CONCLUSION

Logically, we can see that the higher the return offered by an investment, the shorter the time needed to double the capital you hold.

Therefore, you now know what dividend rate you should target and the appropriate time frame needed to achieve your goals.

The choice is in your hands — choose the instrument that suits your investment plan.

Frequently Asked Questions (FAQ)

What is the Rule of 72 in investing?

The Rule of 72 is a simple formula to calculate how long it takes to double your investment money. The method: divide 72 by the annual rate of return. For example, if the return is 8% per year, your money will double in 72 / 8 = 9 years.

Is the Rule of 72 accurate for all types of investments?

The Rule of 72 is most accurate for investments with a fixed rate of return, such as fixed deposits or bonds. For stock investments where returns fluctuate, it only provides a rough estimate — but it is still useful as a guide for long-term planning.

What rate of return is needed to double your money in 5 years?

Using the Rule of 72: 72 / 5 = 14.4% per year. This means you need a return of around 14-15% per year consistently. This rate is difficult to achieve with fixed deposits, but can be attained through smart stock investing on Bursa Malaysia.

Why is it important to understand the power of compound interest in investing?

Compound interest means you earn returns not only on your original capital, but also on the accumulated returns. The longer you invest, the greater the compounding effect — which is why starting to invest early is the greatest advantage you can have.

The Rule of 72 demonstrates that the higher the investment return, the faster your money doubles — and stocks are among the instruments capable of offering returns exceeding fixed deposits or unit trusts.

Open a CDS account to start investing in stocks on Bursa Malaysia and harness the power of compound interest.

Download the free stock basics ebook to understand the fundamentals of stock investing before you begin.

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