Lessons in computing returns – VI Rule 114 and Rule 144

Rule 72 was amazing. Isn’t it? Just as I finished writing that article, my wife (Being a micro-biologist, she doesn’t have much questions to ask about finance but she reads through my articles before I publish) came up and asked a question. “You wrote about calculating the time it would take an investment to double. I would like to know how long it would take for my money to triple. Do you have an easy method for calculating that?”

Of course, yes. Not only that, you can also find out the time it would take to quadruple your investment – Enter rule 114 and Rule 144.

RULE 114-HOW LONG TO TRIPLE YOUR INVESTMENT

To find out how long it will take to triple your investment at x% interest rate, take 114/x.

So, it will take 114/12 (or 9.5 years) to triple your money at 12% interest rate.

Want to triple your money in 6 years? You will have to generate an annual return of 114/6 (or 19 %!)

RULE 144 – HOW LONG TO QUADRUPLE YOUR INVESTMENT

To find out how long it will take to quadruple your investment at x% interest rate, take 144/x.

So, it will take 144/12 (or 12 years) to quadruple your money at 12% interest rate.

Again, If you want your investment to quadruple in 6 years, you will have to generate an annual return of 144/6 (or 24 %!).

I would like to repeat what I said in my previous article. The above rules are not 100% accurate. However, it gives you a reasonable estimate of time required to triple or quadruple your investment at a particular rate of return.

I hope this article was interesting! It will greatly help you with your financial decisions.

For example, if calculations show that 20% is necessary to accomplish your goal and the risk-free interest rate is 8%, you have some choices to make. First, if you insist on the risk-free rate then you must extend the time period you are willing to wait for that money. On the other hand, if you cannot extend the time, you’ll have to accept a little more risk.

Till my next post ….

………..Have a nice day!

You may like these posts:

  1. Lessons in computing returns – V The Rule of 72
  2. Lessons in computing returns – III Compounded returns.
  3. Lessons in computing returns – IV Returns from shares.

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