People are filled with plenty of questions when it comes to investments and returns. The most asked question is “How long will it take for my money to be twice the amount?” or “where will my money be in two year’s time?” there are so many more that investors have in mind regarding the speed with which their money will grow.
Earlier we discussed the Rule of 72 which tells us exactly when is our going to get doubled. Here we are again with two more rules that can be derived from the rule of 72 which tell about the time your money is going to take in order to triple and quadruple itself. The best part is you do not need any specific calculators or spreadsheets for doing these calculations. Also, these rules hold good in case of both simple interest and compound interest calculations.
The rule of 72 is the most fundamental rule every investment entity applies to be it an investor or fund house or your fund manager. It is a simple and effective method of estimating how long will your investments take to double themselves. The rule can also be used otherwise in order the determine the rate of return it would take in order for your money to double itself.
The rule goes as follows:
Time for investment to double = 72 / %age Rate of Return
For example, if a mutual fund investment gives an annual return of 14% then the number of years your money is going to take to double itself is (72/14) = 5.14 years.
You can use this rule to compare different investment avenues like fixed deposits, bank savings, mutual funds, real estate, etc.
Another use of the rule of 72 is to determine the time your money is going to take in order to halve itself due to inflation. For example, if inflation hits at 8% then it will take your money (72/8) = 9 years in order to halve itself.
Note: The rule of 72 is a generalized rule of calculating and estimating the number of years. If you wish to look at a more accurate number there are other variations of the rule available as well. Instead of 72, try using 69.3 for calculating continuous compounding calculations.
- The Rule of 114
After the rule of 72 comes the rule of 114 which tells an investor how long will it take for their money to triple itself.
The rule goes as follows:
Time for investment to triple = 114/ %age Rate of Return
Going by the same example of mutual funds with an annual return of 14%, the time it is going to take to triple your money would be (114/ 14) = 8.14 years.
- The rule of 144
The final rule in line is the rule of 144. As evident, this rule tells how long will it take for your money to become four times its original value or Quadruple. This rule is basically for people who stay invested for a really long-term in order to see their money actually become four times.
The rule goes as:
Time for investment to double = 144 / %age Rate of Return
Following the above example of a mutual fund with 14% annual return, the time it would take the money to become four times is (144/14) = 10.28 years.
You can make use of these calculations in order to determine a rough estimate of the fund’s performance in terms of time value.
So, if you chose an investment avenue which comes with an annual return of 8%, it will take 9 years for your money to double whereas had you opted for a scheme which comes with an annual return of 9% your money would be double in just 8 years. Are you getting the point and the difference?
A wholesome one more year of hard work and effort if you do not make the right investment decision. If making investment decisions seems quite tricky in the current market evaluations, rely on the best. At Piggy, we strive to curate the best investment options for our investors and guide them through till their money earns for them. For the best-in-class financial advisory, try piggy premier.