Want to Double Your Money in 6 Years or Triple It in 10 Years? Here’s How to Do It Using Rule 72 and Rule 114

Investing wisely is the key to achieving financial goals, but often, people are unsure about how long it will take to see significant growth in their money. Whether it’s saving for your child’s education or building a retirement corpus, understanding how quickly your money will grow is essential. This is where simple investment formulas like Rule 72 and Rule 114 come in handy. These formulas help you estimate how long it will take for your investment to double or triple, and they can guide you towards better financial planning.

The Importance of Planning for Inflation

Before diving into the investment rules, let’s take a moment to talk about inflation, which is slowly eating away at the value of your savings. Currently, inflation in India is hovering around 4% to 5%. What this means is that money in the future won’t hold the same value it does today. For instance, something that costs ₹1 lakh today may cost around ₹2.5 lakh after 20 years. The impact of inflation means that you need to invest in schemes that not only grow your money but also stay ahead of inflation.

Understanding Rule 72 and Rule 114

Rule 72 is a simple formula that helps you calculate how long it will take to double your money at a specific interest rate. Similarly, Rule 114 tells you how long it will take to triple your money. There’s also Rule 144, which shows how long it will take to quadruple your money. These rules provide a quick way to understand how your investment will grow without having to dig into complicated calculations.

Here’s how the formulas work:

• Rule 72: Divide 72 by the interest rate you expect to get. The result is the number of years it will take to double your investment.
• Rule 114: Divide 114 by the interest rate to find out how long it will take to triple your investment.

Examples of How These Rules Work

Let’s take a look at some examples of different interest rates and how long it takes to double or triple your money:

How to Double Your Money in 6 Years

Suppose you want to double an investment of ₹5 lakh in 6 years. According to Rule 72, you will need to invest in a scheme that offers 12% interest per annum (72/12 = 6 years). Unfortunately, traditional savings options like fixed deposits or small savings schemes in India do not offer such high returns.

To achieve a return of 12% or more, you might need to look into equity mutual funds or other market-linked instruments. Although these investments come with a higher level of risk, they also have the potential for higher rewards. Over a long period, equities tend to outperform other asset classes, making them a viable option for those looking to double their money in a relatively short time.

How to Triple Your Money in 10 Years

If you aim to triple an investment of ₹5 lakh in 10 years, Rule 114 suggests that you need a scheme offering around 12% interest per annum (114/12 = 9.5 years). Again, traditional savings schemes may not help you reach this goal. Therefore, equity mutual funds or stocks become better options for this type of financial target.

The stock market, despite its volatility, has historically provided returns of around 12% to 15% per year over the long term. By staying invested in well-performing mutual funds or a diversified portfolio of stocks, you can aim to triple your money within a decade.

Choosing the Right Investment

Given that most fixed-income products in India offer returns in the range of 5% to 7%, equity mutual funds, direct equities, or real estate investments are more suitable for achieving these higher returns. These options do carry more risk, but they also provide the potential for inflation-beating returns over time.

Here are some options you can explore:

1. Equity Mutual Funds: These are suitable for those who want exposure to the stock market but prefer a professionally managed portfolio.
2. Direct Equity Investments: For those with knowledge of the stock market, investing directly in shares of companies can yield high returns.
3. Real Estate: Although not as liquid as other forms of investment, real estate can offer substantial returns over a long period.
4. Hybrid Funds: A mix of debt and equity, these funds provide a balanced risk-reward ratio, suitable for conservative investors.

Conclusion

By understanding Rule 72 and Rule 114, you can make more informed decisions about where to invest your money and how long it will take to grow. While traditional savings options might not give you the high returns needed to double or triple your money in a short period, market-linked instruments like equity mutual funds offer the potential for better results.