Thumb rules to use when investing

Back of the envelope calculations may not be accurate to the last decimal but they give you a fair idea of what you are looking for. Here are some immutable financial rules that can help you with quick estimates. Use them to get a grip on your finances and make informed investment decisions.

Rule of 72

This tells you in how much time will your money double. Divide 72 by the interest rate you are compounding your money with and you will arrive at the number of years it will take to double in value.


Rule of 114

Use this to estimate how long will it take to triple your money. It works the same way as the rule of 72. Divide 114 by the interest rate to know in how many years will Rs 10,000 become Rs 30,000.

Rule of 144

Similarly, this tells you in how much time will your investment quadruple in value. For instance, if the interest rate is 12%, Rs 10,000 becomes Rs 40,000 in 12 years.

Rule of 70

This is a useful rule for predicting your future buying power. Divide 70 by the current infation rate to know how fast will the value of your investment get reduced to half its present value. This is especially useful for retirement planning, as it affects the way you set up your monthly withdrawals. However, do remember that the infation rate varies from time to time.


These rules provide only a rough idea. The actual amount after compounding may vary.

(This article is a condensed version of one originally published on February 14, 2011, and may contain chronological references based on that date.)