Knowing these rules of investing can solve your financial doubts in seconds. Have you ever thought of the money you have now will have how much worth in the future?. Then you should know about these investing rules which will surprise you.
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The rule of 72.
This rule is one of the most famously known rules of investing. Just divide 72 by the interest rate of your investment which gives you the year required for double your money.
Doubling time = 72/ interest rate
Must Read: The Rule of 72 – predict when your money will be doubled.
The rule of 114.
Most of you not aware of the rule of 114. But it is used to calculate how much time is required to make your money three times. This rule of investing is similar to the rule of 72. As per this rule, divide 114 by the interest rate of your investment gives then time to triple your money.
Tripling time = 114/interest rate
Suppose you have invested Rs 1 lakh with the expected interest rate of 7% per annum then 114/7 = 16.29. Your 1 lakh will be 3 lakhs after 16.29 years approximately. yes, you have figured out the duration with no time.
Now if you want to triple your 1 lakh within 18 years then just modify this rule as 114/18 = 6.33. Your only work is choosing an investment with a 6.33% rate of return. After 18 years it will be automatically grown into 3 lakhs. This rule is applicable only in the case of interest compounding.
Face, Nose and cough steamer
The Rule of 144.
Yes, as you guessed this rule is helpful to determine how fast your money can develop four times. Divide 144 by the expected rate of return will give you the time required to make your investment quadruple.
Quadrupling time = 144/ rate of interest
Your 1 lakh with an expected rate of interest of 7% will be 4 lakhs in 20.57 yrs.
Also read: Why you should invest in gold?. Check out the gold price history
The rule of 70(inflation).
This rule is like the fifth wheel on the wagon because inflation plays a big role here. According to this rule just divide 70 by the current inflation rate to know how quickly the value of your wealth is reduced to half of its current value. Are you surprised?. Only with the help of inflation, you can know the exact value.
Inflation historical data of India Source: World bank
In a simple term, inflation means an increase in the price of goods and services over a certain period. If the price of a pen was Rs 100 last year and the inflation is 4% means then the price of the pen this year is Rs 104. The value of Rs 100 last year and Rs 104 in current are the same. So as per the rule of 70(inflation)
Duration of your wealth reduced into half = 70/ current inflation rate
14 = 70/5
Assume inflation rate as 5% for next few years. Then 70/5 is 14. In 14 years the value of your wealth is reduced to half. If you bought 10 pens for Rs 100 the after 14 years you can buy only 5 pens for Rs 100. So you should wisely choose an investment plan which is more than an inflation rate.
Comparison.
Suppose if you invested Rs 1 lakh in fixed deposit at 7% rate of interest. In the same years, the inflation rate also the same 7%.
As per the rule of 72, 72/7 = 10.28 years
According to the rule of 70, 70/7 = 10 years
As per the rule of 72, your 1 lakh looks like grown into 2 lakhs in 10.28 years. But if you look closely at inflation the worth of 2 lakhs after 10 years is equal to the worth of 1 lakh in the current year. But when the inflation rate is 3% choosing an investment plan at 8% or more will makes your money grow.
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