Decoding Investment Growth: How the 'Rule of 72' and 'Rule of 144' Aid in Estimating Returns | Stock | Share Market | NSE | BSE | Investment Tip by Warren Buffett

 

The "Rule of 72" and the "Rule of 144" are easy math tricks used by investors to figure out how long it will take for their money to double with a steady annual return.

1. Rule of 72

This rule helps estimate the number of years needed for an investment to double in value at a fixed annual return rate. Just divide 72 by the annual return rate (as a percentage). The answer is the number of years it will take to double the investment. 

For example, if an investment grows at 8% per year, using the Rule of 72, it would take about 9 years to double (72 ÷ 8 = 9).

2. Rule of 144

This rule is like the Rule of 72 but is used for investments with compound interest, like bonds. The Rule of 144 estimates the number of years needed to double the investment with annually compounded interest.

To use the Rule of 144, divide 144 by the annual interest rate (as a percentage). The result is the number of years it will take for the investment to double.

For example, if a bond pays 6% interest per year, using the Rule of 144, it would take about 24 years to double (144 ÷ 6 = 24).

Related Videos:

Investing Rules of 72, 114, 144 & 70: The Ultimate Money Multiplier Guide

Also Read:

Investment Principles of the Legendary Warren Buffett

Warren Buffett, the longtime CEO of Berkshire Hathaway, is widely considered the world's greatest stock investor. He's also known for his simple, memorable investment advice. Here are some of his most famous rules:

Key Takeaways:

• Warren Buffett, CEO of Berkshire Hathaway, is one of the richest people in the world.
• Buffett is considered the best stock-picker in history, and his investment philosophies have influenced many others.
• One of his famous sayings is, "Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1."
• Another well-known saying is, "If the business does well, the stock eventually follows."

Rule 1: Never Lose Money

This might seem obvious since no investor wants to lose their money. However, things can happen that make investors forget this rule. That’s why Buffett emphasizes Rule 2.

Rule 2: Never Forget Rule No. 1

Buffett lost about $25 billion during the 2008 financial crisis, and his company, Berkshire Hathaway, lost its AAA rating. So, how can he tell us to never lose money?

He means that a sensible investor should:

• Not be careless
• Not gamble
• Avoid investing with the mindset that it’s okay to lose money

Instead, be well-informed and do your homework before investing.

Related Videos:

Warren Buffett | How to Invest for Beginners: 3 Simple Rules

Related Link:

https://www.trading212.com/learn/investing-101/buffett-rules-for-investing