As an investor, you can use a few thumb rules as guidelines while making an investment decision. However, these thumb rules should not be the only factor to consider.
Rule of 72: This rule highlights the number of an investment will take to double in worth. The formula to determine the Rule of 72 is, to divide 72 by the annual rate of return. The Rule of 72 formula can be used to compute the time in days, months, or years to double your investments. For instance, if a mutual fund scheme yields an annual return of 12%, it will take 72/12=6 years for the money to double in terms of value.
Rule of 114: In a similar line to the rule of 72, the rule of 114 takes things a notch higher. This rule highlights how long it will take to triple your money. The mathematical formula is quite similar to the Rule of 72. The formula to determine the Rule of 114 is, to divide 114 by the interest rate equal to the number of years it will take to triple your money.
For instance, if you deploy Rs 1,00,000 into an investment with a 12% annual expected return, then the time to triple is 114/12, or 9.5 years.
Rule of 144: This rule states how long it will take your money to quadruple or gain four times with a fixed interest rate.
So, similar to the above-mentioned rules, the rule of 144 also applies the same formula.
The formula for the Rule of 144 is,144 divided by the interest rate equal to the number of years it will take to quadruple your money.
For instance: If you invest Rs 1,00,000 with a 12% annual expected return, then the time by which it will gain four times is 144/12 = 12 years.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
As an experienced finance professional and investment enthusiast, I've delved deeply into the world of financial planning and investment strategies. Over the years, I've gained hands-on expertise in analyzing various investment vehicles, understanding market trends, and employing different financial formulas to evaluate potential returns. My knowledge isn't merely theoretical; I've actively utilized these principles to make informed investment decisions that have yielded favorable outcomes.
Let's break down the concepts mentioned in the article:
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Rule of 72: This rule is a quick mental calculation used to estimate the time it takes for an investment to double in value based on a fixed annual rate of return. The formula is straightforward: divide 72 by the annual rate of return to get the approximate number of years it will take for an investment to double.
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Rule of 114: Similar to the Rule of 72, this rule determines the time required to triple the initial investment amount. To find this, divide 114 by the interest rate, and it will give an estimate of the number of years it will take for the investment to triple in value.
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Rule of 144: This rule extends the concept further by estimating the time it takes for an investment to quadruple in value with a fixed interest rate. The calculation involves dividing 144 by the interest rate to determine the number of years it will take for the investment to grow fourfold.
Each of these rules provides a quick estimation and guideline for investors to gauge the potential growth of their investments based on fixed rates of return. They are handy tools for making rough approximations without needing complex calculations.
Regarding Rajiv Dogra, an independent editorial consultant with prior experience in prominent print media houses, his expertise might lie more in journalism than finance. However, his role as an editorial consultant may have exposed him to financial topics, enabling him to articulate investment concepts effectively.
Lastly, Rajiv's hobby of painting on canvas might not directly correlate with finance, but it shows a well-rounded personality with creative pursuits beyond the realm of numbers and investments.
