Power Of Compounding And Rule Of 72

Friends, we have talked about the power of compounding in many posts.

In fact, compounding is also called the eighth wonder of the world. And why is it said so?

The logic is very simple We have discussed it earlier Assume we have invested 100 Rs anywhere And we earned 10% returns on them. So after a year, the amount will be 110 Rs So neither we will withdraw that 100 Rs nor the interest of 10 Rs So our capital for the next year will be 110 Rs We will again earn 10% returns on that.


So our amount will become 121 Rs Again, we will invest 121 Rs and again earn the returns of 10% So our amount will be 133 Rs In this way, our capital increases, and the returns on that also multiply.

So finally, in the long term, when we see our corpus, we have accumulated a huge lump sum amount. And these are not unrealistic figures I have assumed only 15% returns here You can earn a 15% return in the stock market, mutual funds, etc

I will provide you the links to many financial investments options You can check them out in the description box But the question that arises here is that Whenever we get an option for investment Assume we are expecting that we will get 11% returns 12% returns Or we get only 6% returns on FD So we want to know in how much time my money will be doubled? Or in how much time it will be tripled.

We don’t want to open Excel again and again for this If somebody has brought you a proposal Then you will not do the calculation in Excel in front of him And the calculation of compounding Is quite difficult to do with the help of a calculator also For this, we can do some calculations in our minds very fast I will discuss two formulas in this post. They will be very helpful. Stay tuned. ,

Friends if you want to learn about the stock market or investment So we have made many playlists. Master investor series for the stock market Mutual Funds series, real estate series, bonds series. You’ll find all the links in the description. Other than that, you will also get the important investment-related links in the description So assume you are evaluating a financial product Whether you are doing it online or any financial advisor has come to you And you want to know in much time and according to how much returns My money will be doubled. So for this, there is a very easy rule Rule number 72.

So whatever your returns of investment are Divide 72 by it. So assume you are evaluating a fixed deposit And you get the annual returns of 6% there So, 72÷6=12 This means, in 12 years, your money will be doubled. On the other hand, if you are evaluating a mutual fund type of investment So what will you do there?

You will do 72÷12. We get an average return of 12 to 13% on mutual funds So we did 72÷12, then our money will be doubled in 6 years. So as compared to the FD, our money gets doubled in half time So assume you directly invest in stocks, you can expect better returns there. You can expect up to 15 to 20% returns So if you think that you can multiply the money according to the 20% So what will you do? You will do 72÷20 The answer is 3.6 years Which means your money is getting doubled in approx 3.5 years.

Imagine you are doubling the money every 3.5 years So in 7 years, your money will be 4 times If you do this in this way, and if you do it for 35 years Then you can imagine your money will become huge So this formula tells us in how much time our money will be doubled.

So if we want to know in how much time our money will be tripled. For that, there is the Rule of 114. So if we take the example of FD Then what will we do? We will divide 114 by 6% So, 114÷6= 19 years This means our money will be tripled in 19 years We will use the example of a mutual fund. If we do 114÷12 This means, in 9.5 years, our money will be tripled.

We will talk about the stocks assuming we will earn the returns of 20% So we will divide 114 by 20 So 5.7 years. This means in approx 6 years, your money will be tripled So in this way, we can evaluate any financial investment. It takes hardly a two-second formula I am sure it will be very useful for you. These short formulas are very useful for us in our daily lives If you have any suggestions related to the post Then you can comment below.

keep learning, keep earning And be happy as always.

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