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.