Latest news with #Ruleof72
News18
5 days ago
- Business
- News18
How The Rule Of 72 Can Help You Double Your Money
Last Updated: The Rule of 72 is a simple formula that helps you estimate how long it takes to double your money with compound interest. Managing money wisely means understanding how your investments can grow over time. One simple tool that can help is the Rule of 72. It is not complicated or technical—just a quick math trick that gives you a rough idea of how long it will take to double your money at a given rate of return. Let's break it down in a simple way. What Is the Rule of 72? The Rule of 72 is a quick formula used to estimate how many years it will take for your investment to double in value, based on a fixed annual rate of return. It is a handy tool for investors, savers, or anyone curious about how interest affects their money over time. Instead of using a calculator or complex financial formulas, the Rule of 72 offers a fast and fairly accurate shortcut. The Formula Here's the basic formula: 72 ÷ 6 = 12 years The rule is based on the concept of compound interest, where your returns earn additional returns over time. The Rule of 72 gives an approximation of this compounding effect. Here are a few more examples: At 9 per cent interest, money doubles in 8 years (72 ÷ 9). At 12 per cent, it doubles in 6 years. At just 3 per cent, it takes 24 years. It works best with interest rates between 6 per cent and 10 per cent, though it can still give a rough idea outside this range. Advantages of the Rule of 72 – Simplicity: You don't need to be a math expert. The calculation is quick and simple. – Planning Tool: It helps you set realistic financial goals by estimating how long it will take to grow your money. – Comparing Options: You can easily compare different investment returns to see which one doubles your money faster. – Awareness of Inflation: You can even use the Rule of 72 to understand how inflation eats into your money's value. For example, if inflation is 6 per cent, the value of money halves in 12 years (72 ÷ 6). The Rule of 72 is not a perfect tool, but it is a smart, quick way to get a rough estimate of growth. Whether you're investing, saving, or planning your financial future, this simple rule can help you make better decisions and understand the power of compounding. view comments Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
The Hindu
14-07-2025
- Business
- The Hindu
Some rules to open the gates of financial freedom
A luxury flat, SUV, holiday tour abroad and at least ₹1 crore in bank balance are everyone's dream. However, only a few realise such kind of dreams and the remaining 'unlucky' lot end up thinking these are possible only for those born rich. Whereas most financial experts believe proper planning is all that is needed to become rich. Of course, financial planning could be a labyrinth of calculations and choices that might seem to be difficult to understand, but if you get a grip on the patterns and formulae, passed on by financial experts, it's much easier to attain financial freedom. Let's catch up with the numbers. 15*15*15 Rule Not just the super-rich, even a salaried individual can accumulate ₹1 crore if he/she follows the 15*15*15 Rule. Save ₹15,000 a month for 15 years continuously, without any single default in monthly savings, in a 15% CAGR generating mutual fund. If he/she wishes to continue the same for another 15 years, he/she would have saved a whopping ₹10.5 crore. The magic lies in compounding and consistency is the key. Rule of 72 It's a simple trick or a calculation to find out how long it will take for your investment to double at a fixed rate of return. To find the number of years, just divide the number 72 by the interest rate you will receive on your investment. For instance, if you receive 6% interest per annum, money doubles in just 12 years (72/6). Not just this, with this formula, you can calculate the ideal rate of return if you want to double investment in certain number of years. Say, for example, if you want to double investment in four years, you should get 18% interest per annum. Just divide 72 by the number of years. Rule of 114 The Rule of 114 is much like Rule of 72 and tells you when investment triples. Just divide 114 by the annual interest rate received to find out how many years you need for wealth to grow threefold. If interest per annum is 6%, money triples in 19 years (114/6). If you want to triple investment in just five years, you should get 22.8% interest per annum (114/5). Rule of 144 This Rule tells you when your investment quadruples in value — just a simple division. 50/30/20 Rule Budgeting is crucial to the country and to individuals as well. It might be quite complicated with limited resources and vast goals; however, the 50/30/20 Rule comes in handy to make the budgeting process easier and sustainable. Divide net-income (after tax deductions) into three major categories: 50% for essentials such as rent or housing EMI, groceries, medicines, utilities etc.; 30% for wishes such as entertainment, tour, shopping etc. and balance 20% for savings and debt repayment. Some financial experts add the debt repayment in the first 50% category leaving the 20% category only for savings. 100 Minus Age Rule The most fundamental question in personal finance is on asset allocation. That is, how much money is to be allocated to buy risky assets such as stock markets and how much should be parked in conservative investment products. The 100 Minus Age Rule answers this dilemma. As per this rule, one must subtract his/her age from 100 to determine the percentage of equity portfolio, and the rest allocated to low-risk assets or traditional fixed/recurring deposits. If you are 30, 70% (100–30) of your investment can be in equities, and 30% in bonds, FDs, or other debt funds. However, this rule cannot be taken blindly and just gives a fair idea. A young man who is the breadwinner of his family with more commitments can't invest 70% in equities, whereas a septuagenarian pensioner without commitment and is well taken care by children, can invest more in equities. 10X Insurance Rule The 10X Rule helps an individual calculate the amount of life cover his/her dependents would require in his/her absence. As per this Rule, the term life insurance cover should at least be 10 times his/her gross annual income. However, this rule has its own limitations and might not be suitable for everyone. The Rule doesn't consider factors such as age, specific family needs, number of dependents etc. While these number-based thumb rules are shortcuts to crack the code of complicated personal finance decisions, one size doesn't fit all. So, care must be taken while taking important financial decisions. (The writer is an NISM & CRISIL-certified Wealth Manager)
News18
04-07-2025
- Business
- News18
Can India Be A $30 Trillion Economy By 2047? Aditya Pittie's New Book Makes The Pitch
Last Updated: In 'Viksit Bharat: India@2047', Aditya Pittie uses data, sectoral blueprints and the Rule of 72 to argue India can surpass even NITI Aayog's projections & hit $30 trillion by 2047 As of mid-2025, India's economic size has grown to approximately $4.34 trillion, overtaking Japan to become the fourth-largest economy in the world. Prime Minister Narendra Modi, during his Independence Day speech in 2023, had set this target, and later reiterated how, by 2028, India would be among the world's top three economies. But entrepreneur Aditya Pittie's new book Viksit Bharat: India@2047 (Fingerprint Publishing) looks further ahead, to the centenary year of India's independence. For Pittie, it's not just about flexing a $30 trillion economy by then, but also addressing one of the Opposition's most pointed criticisms: India's low per capita GDP. Pittie's book, which often reads like a PowerPoint deck, argues that by 2047, India should aim not just for a bulky $30 trillion economy, but also a per capita income exceeding $18,000. He does admit, however, that as per a NITI Aayog report, India's GDP is projected to grow at an average annual rate of 7-8 per cent, reaching $26 trillion by 2047. So, with 22 years to go, how does Pittie suggest the Modi government prove NITI Aayog wrong? When he wrote the book in 2024, India's economy was smaller than it is now — at $3.94 trillion — and he has based his calculations accordingly. Pittie writes: 'Starting from a $3.94 trillion economy in 2024, India needs to grow to $30+ trillion by 2047 — a 23-year period. This requires a compound annual growth rate (CAGR) of approximately 9.2 per cent in nominal GDP. India's expected GDP growth rate is between 6 and 9 per cent. Factoring in an average annual inflation rate of about 4-6 per cent, India's nominal GDP growth could comfortably average around 12 per cent per annum." The MIT alumnus then brings in a theory he calls the 'Rule of 72', a tool to estimate how long it takes for an economy to double its GDP. 'By dividing 72 by the nominal GDP growth rate, one can calculate the approximate number of years it takes for GDP to double. For example, at a 12 per cent nominal growth rate, the economy would double every six years (72 ÷ 12 = 6)," he explains in the book. So, by 2030, India should be an $8 trillion economy — the first doubling. By 2036, $16 trillion. If the trend holds, Pittie writes, India could become a $50 trillion economy by 2047, well beyond the stated goal of $30 trillion. 'Even with occasional fluctuations and external shocks, this trajectory offers an adequate margin to achieve the projected figure by India's centenary of Independence," he notes. Pittie says this is doable and realistic, provided a few key conditions are met. First, India's growth engine needs to remain consistent. Governance reforms are due. The country's demography must be turned into a dividend. And there has to be a sharper focus on per capita income and per capita wealth, two factors that developed nations typically take very seriously. In the book, Pittie lays out a 2047 roadmap across multiple sectors — infrastructure, urban development, digital infra, education, and entrepreneurship. What sets Viksit Bharat: India@2047 apart is that it goes beyond opinion, offering practical, sector-specific solutions, whether it's artificial intelligence or waste management. Essentially, if India aims to become a developed nation, Pittie attempts to adapt and synthesise key policy ideas from developed countries, grounding his proposals in research and data.
Mint
12-06-2025
- Business
- Mint
5 golden personal finance rules to simplify your financial planning
As inflationary pressure eases and domestic investment regains traction, it is prudent to revisit five 'rules of thumb' reiterated by finance professionals to facilitate efficient financial planning. From estimating investment, growth to managing debt, these simple guidelines are proving invaluable. The 'Rule of 72' provides a quick way to analyse and estimate how long an investment will take on an approximate basis to double in value. For the same you should just divide 72 by the annual return rate. For example, at 8% annual return your money will double in roughly nine years. Now, in a post inflation world, nations CPI inflation hovered around 3-3.2% in April 2025. This rule can help investors understand and gauge real growth and counter erosion of value. This formula is used to define the allocation of equities in your portfolio. It suggests that you should hold Equities = 100 - your age (%)with the rest of the remaining balance in debt. For example, a 30 year old investor would aim for a 70:30 equity to debt mix. Now it is a given that not one size fits all, it still provides a solid foundation for age based risk management and gives a fundamental view on long term investments. This rule simply means that your total EMI burden should not exceed 40% of your net monthly income. With rising home, auto, and personal loan rates, sticking to this cap ensures households avoid overleveraging and safeguard against financial stress. For example, if your monthly salary is ₹ 1,00,000 then your total EMI outgo should not be more than ₹ 40,000 after covering all the heads such as home loan EMIs, personal loans, credit card bills along with other similar debt repayments. The 'Rule of 70' is the cousin of the 'Rule of 72', the Rule of 70 for inflation shows how quickly inflation halves purchasing power of an individual. At 7 per cent inflation, money's value would halve in just 10 years (70 ÷ 7). Therefore, given nations' periodic spikes in food and fuel inflation, this rule provides a strict wake up call for individuals to manage their finances effectively and make inflation-beating investments. Now to estimate when your investment will quadruple i.e., multiply by four times you should apply the 'Rule of 144' in this, you need to divide 144 by the annual yield to get to the desired figure. For example, at 8% return, you can expect a four fold increase in 144/8 = 18 i.e., 18 years. This rule is relatively lesser known still it provides a longer term perspective on wealth accumulation. Hence, with the nation's inflation cooling off to 3% in May, the lowest figure in six years along with inflows into equity mutual funds dropping by 21.66% month on month to ₹ 19,013.12 crore, in such an environment retail investors must stay updated and informed on these rules. Therefore, these five rules can assist investors to grow investments, allocate assets by age, manage debt efficiently, beat inflation and secure long term financial prosperity. Disclaimer: This article is intended for informational purposes only and does not constitute financial advice. Readers are advised to consult a certified financial planner before making any financial or investment decisions.
The Sun
26-05-2025
- Business
- The Sun
No shortcut to wealth
IN the age of social media, self-proclaimed 'investment gurus' are everywhere – often flaunting eye-catching profit screenshots and bold claims of life-changing returns that leave their followers spellbound. Even more alarming is the use of AI technology to mimic well-known investment influencers, luring followers into so-called 'investment groups'. Unfortunately, some of these promises have led to significant financial loss. What appears to be free advice often comes with hidden cost. It is crucial to approach such content with a healthy dose of skepticism. The goal of many of these so-called gurus is not to teach you how to make money but to profit themselves – often at the expense of their audience. Countless people, including everyday individuals and professionals, have suffered significant losses. This raises an important question: Why do people fervently believe in these gurus and fall into such traps? Many mistakenly view investing as a kind of magic – believing that finding the right guru will lead to overnight riches and lasting financial security. Unfortunately, this mindset is not only misguided but also potentially dangerous. It is important to remember that the true essence of investing is wealth preservation. While investments will not make you a millionaire overnight, they can help you combat inflation and safeguard the fruits of your labour. According to the Rule of 72, with an inflation rate of 5%, your wealth would lose half its value in less than 15 years if left uninvested. While investing is essential for preserving and growing wealth, promises of double returns or 'get-rich-quick' schemes should be treated as red flags. The true power of investment lies in compound interest – the ability to earn returns on your previous returns over time. Warren Buffett became one of the world's most successful investors not through some mysterious skill but by understanding and harnessing the power of compounding. He started investing at a young age and consistently held high-quality assets for the long term. Even with seemingly modest annual returns, decades of compounding transformed his wealth to staggering levels. However, Buffett's wealth did not truly take shape until he was 65. His methods are public and straight-forward, yet many refuse to follow them because they cannot accept the idea of steady, long-term growth. The core of compound interest lies in time, not short-term high returns. Like personal growth or building a career, wealth accumulation is a gradual process. There are no shortcuts, only sound decisions repeated over time. To avoid falling victim to false promises, the first step is a shift in mindset. Investing is not about chasing big gains; it is about protecting your wealth. The real goal is defence, not offence – shielding your assets against inflation and uncertainty. Many people mistakenly equate investing with stock trading or speculation. In reality, true investment should prioritise stability, focusing on asset allocation and risk management. Last year, Malaysia's official inflation rate was expected to average between 2% and 3.5%. To stay conservative, we doubled this figure, setting a target return of 5% to 7%. Achieving or slightly exceeding this target is sufficient as higher returns often come with higher risks. When investment is viewed as a form of self-defence, it becomes possible to navigate the complexities of financial markets successfully. Investment can become your financial self-defence. Instead of chasing hype or jumping on every trend, focus on deepening your understanding. Your perspective will shape your actions and your actions will determine your destiny. Some hustle tirelessly yet end up with nothing while others observe calmly and reap the rewards. May we all choose the latter – investing wisely, thinking critically and protecting the wealth we have worked so hard to earn. Dr Lee Chee Loong is a member of the Active Ageing Impact Lab and a senior lecturer at Taylor's University. Comments: letters@
