# INVESTMENT RULES

# Good Morning ,

### Wealth Creation is so simple if direction & knowledge is right.

### It becomes too much difficult in absence of proper knowledge.

#### There are few set of Rules & Formula , which every investor need to know.

##### These rule and formulas will help to link your monetary requirement with your investment horizon.

*1.Rule of 72: *

*1.Rule of 72:*

It Gives an estimate of how long it will take to double your investment.

Time Taken to Double your Amount= 72/Rate of Interest

**FD**– Investment-1,00,00 , Rate of Interest -7% , Time taken to double the amount (rs.2,00,000) – 10.28 years

** Rs. 2,00,000 =114/7 =10.28 years**

**LIQUID/DEBT FUNDS-** Investment-rs.-1,00,000, Assumed ROI -9% ,Time taken to double the amount-8 Yrs

** Rs. 2,00,000=114/9= 8 years**

*2.Rule of 114 *

It gives an estimate of how long it will take to triple your investments . Again we will take 2 example in case of FD & Liquid Funds .

Time Taken to Triple your Amount= 114/Rate of Interest

**FD**– Investment-1,00,00 , Rate of Interest -7% , Time taken to triple the amount (rs.3,00,000) – 16.28 years

** Rs. 3,00,000 =114/7 =16.28 years**

**LIQUID/DEBT FUNDS-** Investment-rs.-1,00,000, Assumed ROI -9% , Time taken to triple the amount-12.66 Yrs

** Rs. 3,00,000=114/9= 12.66 years**

3. *Rule of 144:*

It gives an estimate of how long it will take to quadruple (4 times) your investments .

**FD**– Investment-1,00,00 , Rate of Interest -7% , Time taken to quadruple (4 times the amount (rs.3,00,000)-20.57

** Rs. 4,00,000 =144/7 =20.57 years**

**LIQUID/DEBT FUNDS-** Investment-rs.-1,00,000, Assumed ROI -9% , Time taken to triple the amount-12.66 Yrs

** Rs. 4,00,000=144/9= 16 years**

*4. The Stanley and Danko Formula:*

** **A simple formula which tells you what your net worth should actually be or your ‘expected’ net worth.

This states that:

(Your age) x (Pre-tax annual household income from all sources, except inheritances) / 10 = *Your “expected” net worth*

Results will be in 3 categories-

**1. Under accumulators of wealth (UAWs) **are below with their expected net worth.

2. **Average accumulators of wealth** (AAW) are on par with their expected net worth.

**3. Prodigious accumulators of wealth (PAWs) **are above with their expected net worth.

Let’s take an example to understand:

**Priya**, 50, has a net worth of Rs.17.5 Lakhs and **Sonia**, 30, has a net worth of Rs. 1.3 lakhs.

Lets see what is there actual net worth according to formula.

**Case -1**

Priya earns Rs.150,000 a year and has investments that return Rs.15,000 for a total annual income of Rs. 165,000. Multiplied by 50 (her age) that’s Rs.8.25 Lakh . Divided by 10, her net worth should be Rs .825,000.

50*(150,000+15,000)/10

50*165,000/10=825,000

Priya is a Prodigious accumulators of wealth.

**Case-2**

Sonia is 30 years old, with a total annual realized income of Rs.95,000. Multiplied by 30, that’s Rs.2.85 Lakh. Divided by 10, her net worth should be Rs.285,000.Her worth is Rs.130,000.

30*95,000/10=285,000

Sonia is a Under accumulators of wealth.

Reference: *Business Insider*

Its on you, that how you want to create the wealth and in what time you want to create wealth. FD is a traditional tool which become outdated. On other hand ,liquid funds are beating inflation rate with securities.

Happy Investing