Financial management is essential when planning for the future or preparing for unforeseen events. Whether you’re saving or investing, you should always look for the best option to get the most out of your money.
Choosing the best investments and formulating an investment plan that maximizes returns can be overwhelming. There are numerous general guidelines for investing. Thumb rules shouldn’t be the primary factor in deciding whether or not to purchase a product, despite the fact that they might be of great assistance.
The catch is the anticipated interest rate. Any investment product cannot provide a 100% guarantee regarding the interest rate it will be able to offer in the coming years.
However, thumb rules might serve as general guidelines.
Rule of 72:
Given a predetermined annual interest rate, the Rule of 72 is a straightforward method for determining how long it will take for an investment to double. Divide 72 by the annual rate of return to determine how long it will take for an investor’s initial investment to double.
For instance: It will take (72/14) = 5.14 years for your money to double in value if an investment in a mutual fund earns a 14% annual return.
Rule of 114:
After the rule of 72, the rule of 114 tells investors how long it will take for their money to triple. To achieve this, divide the number 114 by the return rate of the investment product. The time it will take for your investment to triple is represented by the remaining years.
For instance: The time to triple an investment worth Rs 100,000 with an annual return of 10% is 114/10, or 11.4 years.
Rule of 144:
The final rule on the list is rule 144. The length of time it will take for your money to increase to four times, or quadruple, its initial value is explained by this rule. This idea basically applies to people who keep their money invested for a long time in order to see it grow four times as fast.
For instance: If you put in Rs. 1,000,000, then Time by Fourfolding is 144/10 = 14.4 years at a 10% annual expected return.
