Rules of Investment | How much time does it take to Double, Triple or Quadruple your money

Rules of Investment | How much time does it take to Double, Triple or Quadruple your money

Personal Finances are personal for most of the people. There are a number of online guides and tips on how to manage your money. But most of the people find it difficult to understand these guides and tips due to their complexities. 

However, knowing some simple financial rules is very essential for you to understand when you can expect your investment to double, triple or quadruple. There are also some simple rules of investment that are evergreen. 

In this post, I will discuss some rules of investment and how much time does it take to double, triple or quadruple your money.

Rules of Investment

There are some simple calculations that you can apply to make intelligent investment choices. These evergreen rules of investment can do wonders for you and solve your basic financial problems in no time. 

So what are you waiting for just pick up a calculator and get started? Note that these rules of investment will give you an approximate of how much time does it take to double, triple or quadruple your money and a basis of comparing one investment to another. The actual final amount may vary after compounding.

Also read: Benefits of SIP | Advantages of SIP

Rules of Investment | How much time does it take to Double, Triple or Quadruple your money

1. Rule of 72

This rule tells you in how much time your invested money will double on compounding. Simply divide 72 with the rate of interest at which you are investing your money and it will give you the magical number which states number of years for your money to double in value. For example, your invested money will be double in 7.2 years if the rate of interest is 10% (72/10 = 7.2 years).

2. Rule of 114

The rule tells you in how much time your investment will triple on compounding. Similar to the rule of 72, just divide 114 with the rate of interest to know the magical number which states number of years for your money to triple in value. For example, it would take 11.4 years to triple your invested money if the rate of interest is 10% (114/10 = 11.4 years).

3. Rule of 144

Apply this rule when you want to know when your money will quadruple in value on compounding. Similar to the above rules, simply divide 144 with the rate of interest to know the number of years for your money to quadruple in value. For example, if the rate of interest is 10% then it would take 14.4 years to quadruple your money (144/10 = 14.4 years).

4. 100 minus your age rule

This is a rule of thumb used for asset allocation on the basis of your age. As per this rule, just subtract your age from 100 to find out the percentage of funds you should invest in equities. For example, if your age is 25 then according to the formula you should invest (100-25) 75% in equities and the rest in debt asset class.

5. 50 20 30 rule

The 50 20 30 is a general rule of budgeting to make sure you are on the right track. This rule is an easy tool that helps in creating balanced monthly budgets for self. According to the rule, 50% of the salary you should spend on essential living expenses like rent, food, clothes, transportation, bill payment and other expenses. The next 20% should go to short-term goals and maintain an emergency fund. The next 30% of your income should go to long-term financial investments. This rule will help you identify where you are overspending.

6. Future Value of your money

You should consider the inflation factor while investing your money for a long-term financial goal. With rising inflation, your purchasing power will be reduced in future. For example with an average inflation rate of 8%, an expense of Rs. 1 lakh will turn into Rs. 2 lakhs in 8 years. You can calculate the future value of your money with the help of below formula.

Future Value (FV) = Present Value (PV) (1+r/100)n

Here,
FV = Future value

PV = Present value
r = Rate of inflation (Annual)
n = Years to reach your goals

7. Emergency fund rule

You should put away at least six months worth of expenses in a liquid saving account for emergencies. You should also keep in mind your existing EMIs and insurance premiums while creating an emergency fund because that need to be paid regularly. Note that you should not withdraw from this fund unless it is for emergencies.

Hope after reading this post (Rules of investment), you can solve your basic financial problems and make intelligent investment decisions.

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Rules of Investment | How much time does it take to Double, Triple or Quadruple your money