When it comes to making plans for the future or preparing for unforeseen circumstances, managing your finances is crucial. To earn a greater return, whether investing or saving, one should always hunt for the finest alternative.
It might be overwhelming to select the best investments and design an investment strategy that produces the best returns. There are many common investing rules of thumb. Although they might be a wonderful help, thumb rules shouldn't be the main factor determining whether you buy a product or not. The predicted interest rate is the catch. You won't be able to get a 100 per cent guarantee from any investment product about the interest rate it will be able to deliver in the upcoming years.
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Thumb rules, however, might act as general recommendations.
Rule of 72:
The Rule of 72 is a straightforward formula for calculating how long it will take an investment to double given a set annual rate of interest. Investors can predict the number of years it will take for their initial investment to double by dividing 72 by the annual rate of return.
For example: If a mutual fund investment yields an annual return of 14%, it will take (72/14) = 5.14 years for your money to double in value.
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Rule of 114:
The rule of 114, which follows after the rule of 72, advises an investor on how long it will take for their money to triple. Take the number 114 and divide it by the investment product's return rate to achieve this. The amount of years left is how long it will take for your investment to treble.
For example: If you put Rs 100,000 into an investment with a 10% annual expected return, then the Time to triple is 114/10, or 11.4 years.
Rule of 144:
The rule of 144 is the last rule in the list. This rule explains how long it will take for your money to increase to four times, or quadruple, its original value. This concept essentially applies to people who stay invested for a very long time in order to watch their money grow four times as much.
For example: If you invest Rs. 1,000,000 with a 10% annual expected return, then Time by Fourfolding is 144/10 = 14.4 years.
