Want to become a crorepati quickly? Six easy methods to follow on National Mathematics Day
Many investors devote a significant amount of effort to stock or mutual fund selection, but neglect to devote the same amount of time to money management or goal-based investment. After all, a goal without a strategy is just a fantasy.
Investing takes a great deal of patience, tenacity, and discipline. Money management, investment planning, and reaching various financial goals are all aided by the mathematical laws outlined below.
1. The 50-20-30 rule
This rule aids in the development of saving discipline. The guideline states that you should set aside 50% of your post-tax earnings for household costs, 20% for short-term objectives, such as savings for a rainy day, and 30% for long-term goals. A trip plan, a car, children’s education, and so on are examples of short-term financial ambitions.
2. The rule of 15-15-15
This is a formula for becoming a crorepati. It is necessary for an investor to save Rs 15,000 every month for 15 years in an investment that yields a 15% return. This formula combines the best of both worlds: a lengthy lifespan and a good return on investment. In the current situation, the only way to meet these criteria is to buy in stocks (not cryptocurrency).
Even though equities markets have had some bad years and some excellent years, in the long run, they have been shown to provide a 15% return. To achieve this aim, a person might start a Rs 15,000 Systematic Investment Plan (SIP).
3. The Rule of 72
This is a simple formula for calculating the amount of time it takes to double your money. You may estimate how long it will take to double your investment by a division of 72 by the projected ROI or interest rate. If an investment in shares returns 15%, for example, the time it takes to double the investment is 72 divided by 15, or 4.8 years.
4. The 114 Rule
This rule is used to determine how long it will take you to triple your money. The desired time may be calculated by a division of 114 by the estimated ROI. Using the same example as before, a 15% return investment would take 7.6 years to pay off. The benefit of compounding is factored into the computation.
5. The 144 Rule
Divide 144 by the estimated ROI to find the time it will take to quadruple your money. It would take 9.6 years for a 15% ROI investment to quadruple the beginning cash.
6. Subtract 100 from your age
For asset allocation, this rule has been recommended. Your age must be deducted from 100 to get a value that represents your equity allocation. Equities can account for up to 75% of a 25-year-investable old’s funds. The aim behind this guideline is that your risk-taking ability decreases as you become older.
Any damages suffered within this time period are recoverable. Because risk-taking capacity declines with age, it is not appropriate to invest in a riskier asset class.