Understand the Rules of 72, 114, 144, and 70: How Fast Your Investments Can Grow or Lose Value?

How fast can your money double, triple or quadruple? Or, how fast can the value of your investments/ money come down? If investors, especially the new ones, get some idea about how soon they can expect to grow in a particular asset class, they may be better motivated and excited to invest and continue with those investments. Here are the three simple rules that can give you an idea of how fast your money can grow. We have covered another interesting rule towards the end that talks about how quickly the value of your money can decrease.

Investing Rule of 72: Calculating the number of years in which your money doubles is very easy with the Rule of 72. Take the number 72 and divide it with the rate of return of the investment product, and you get the number of years in which your money can double.

Suppose you're looking to invest Rs 1 lakh in a bank fixed deposit (FD), which is currently offering an interest rate of 7 per cent. Now if you divide the number 72 with 7, you arrive at 10.3. That means your Rs 1 lakh investment in the bank FD can become Rs 2 lakh in little over 10 years.

Investing Rule of 114: The Rule of 114 tells you how many years it will take to triple your money. The mathematical formula for Rule of 114 is similar to Rule of 72. For this, divide the number 114 with the rate of return of the investment product. What we get is the number of years it will take to grow your money three times.

Going by the same example, if you invest Rs 1 lakh in an investment vehicle that gives you an interest rate of 7 per cent, then as per the Rule of 114, it will become Rs 3 lakh in 16.3 years.

Investing Rule of 144: This rule of investing helps you to calculate in how many years your money will grow four times if you know the rate of return. So if you invest Rs 1 lakh in an investment option that gives you a 7 per cent interest rate, it will become 4X, that is Rs 4 lakh, in 20.2 years as per the Rule of 144.

All you need to do is divide the number 144 with the interest rate of the product to calculate the number of years in which the money will grow four times.

Now, as much as it is important to understand how fast your money might grow, it is equally essential to know how fast the value of your money diminishes or comes down. But, why would the value of your money come down?

Investing Rule of 70: This is an excellent rule that helps you determine what your current wealth will be valued at 10 or 20 years down the line, even if you don't spend a single penny from it due to ‘inflation’. Everything tends to become costlier with time, and we will be required to pay more money to buy the same thing after a few years.

So to calculate this, take the number 70 and divide it by the current inflation rate. The number that you arrive at is the number of years your wealth will be worth half of what it is today. For example, if you have Rs 50 lakh and the current inflation rate is 5 per cent. To know how much time it will take to bring down the value of that 50 lakh to half, divide the number 70 by inflation rate, that is five. So we get 14. So going by the Rule of 70, your Rs 50 lakh will be worth 25 lakh in 14 years.

These rules do not give you an exact number. But you can use them like an estimation, which can help you plan for your goals better.