Best Investment Planning: Money will rain with 4 magical rules, know when and how the money will double, triple and quadruple?

Business Desk – Best Investment Planning: Proper financial planning and investing money in the right places is important for everyone. In the world of finance, compounding and discounting are two terms that are very important to understand to make right investment decisions. In simple words, compounding tells us how much our money will grow over time.

On the other hand, discounting decides what is the real value of money received in future at present. People often mistake these concepts for difficult math, but with the help of some very simple rules, you can easily understand the movement of your money and the impact of inflation.

When will your money double, triple or quadruple?

Rule of 72: If you want to know how many years it will take for your money to double, simply divide 72 by the applicable interest rate. For example, if you are getting an interest rate of 15%, dividing 72 by 15 is 4.8 years. This means that your money will double in approximately 5 years.

Rule of 114: To find out when your money will triple, divide 114 by the interest rate. If the interest rate is 10%, it will take 11.4 years for your money to triple.

Rule of 144: To see your investment quadruple, divide 144 by the interest rate. At an interest rate of 10%, your money will quadruple in 14.4 years.

What is the real meaning of compounding and discounting?

Compounding simply means earning interest on your interest. When you earn interest on an investment, that interest is added to your original principal amount. After this, you earn interest on the entire increased amount. This continuous process of reinvesting grows your wealth very quickly.

On the contrary, discounting is just the opposite. It tells the present value of the money that is expected to be received in the future. Over time, the purchasing power of money decreases due to factors such as inflation and risk; This process is called discounting.

Danger of inflation and rule of 70

Inflation becomes the biggest obstacle while planning for retirement. Due to inflation, the value of Rs 100 today becomes much less in the future. The ‘Rule of 70’ is very useful to find out when the value of your money will be halved.

Simply divide 70 by the country’s current inflation rate. This will help you understand how many years it will take for the value of your money to be halved. With the help of these simple rules, you can save enough for your future and retirement years.