SIP, MUTUAL FUND: MASTER THE MONEY GAME! 5 SIMPLE INVESTING THUMB RULES TO BECOME RICH | CALCULATION EXPLAINED

SIP, Mutual Fund Calculator: Investing is often compared to a complicated game, full of emotional pitfalls and requiring clear, disciplined decision-making. That’s why adopting a set of foundational rules is essential to navigate the unpredictable financial world.

Remembering and using these crucial thumb rules can help investors become successful and wealthy in accumulating money. These rules can assist investors in making informed decisions, setting achievable goals, and working toward long-term financial success.

Here are five thumb rules of investing to help become a successful and wealthy investor.

1. Rule of 72: Doubling your money

How long will the Rule of 72 take to double your money? Well, this Rule of 72 is a simple and powerful formula that helps estimate the time required for an investment to double in value.

Calculation: Divide the number 72 by the estimated annual rate of return on your investment to get the approximate number of years it will take to double your money.

Example: With a 6 per cent annual return, your money is expected to double in approximately 12 years (72/6=12).

The Rule of 72 provides investors a quick way to assess the potential growth of their investment and capital allocation efficiency of any investment.

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2. Rules of 114: Tripling and quadrupling your money

The logic of the Rule of 72 helps investors set realistic long-term growth targets to triple their investment. Just like the Rule of 72, you divide 114 by the rate of return to find out the number of years it will take to triple your money.

For example -

• Rule of 114 (Tripling): Divide 114 by the rate of return. A 6% rate of return will triple your money in roughly 19 years (114/6 = 19).
• Rule of 144 (Quadrupling): Divide 144 by the rate of return. A 6% rate of return will quadruple your money in approximately 24 years (144/6 = 24).

3. The Rule of 70: Measuring inflation’s impact

While focusing on growth is vital, protecting capital from inflation is equally important. The Rule of 70 is a useful tool that helps to understand the impact of inflation on your wealth.

Calculation: Divide the number 70 by the current inflation rate (%).

Example: If the inflation rate is 5%, the purchasing power of your wealth will be halved in about 14 years (70/5 = 14).

The Rule of 70 rule underscores the necessity of choosing investments that can consistently outperform inflation. Therefore, it is vital to consider it when making investment decisions.

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4. The 10, 5, 3 Rule: Setting return expectations

The 10,5,3 rule offers a simple guideline that provides a clear approach to forecasting potential returns from diverse assets. It has been described as a financial compass for investors, enabling them to navigate the vast array of investment options.

The rule suggests expecting around 10 per cent returns from long-term equity investments, 5 per cent from debt instruments, and 3 per cent from savings bank accounts. This rule helps investors set realistic expectations and allocate their investments accordingly.

Note: These figures are estimates and should be adapted based on market conditions.

5. The 100 minus age rule: Managing asset allocation

Asset allocation is the key to managing risk in investment portfolio. This rule provides a simple guideline for balancing equity and debt based on your stage of life.

According to this rule, you allocate a percentage of your portfolio to equities based on the formula: 100 minus your age.

The remaining percentage should be invested in debt.

Example: A 25-year-old would allocate 75% to equities and 25% to debt.

The rule encourages younger investors to take more risk (higher equity exposure) and older investors to focus on capital preservation (higher debt exposure).

2025-10-30T18:22:11Z