As you will find from some of the strategies that investors are interested in using to increase wealth, always look for a way to double an investment within five years or triple it in seven and a half years. Such growth means understanding how interest rates work with investment duration, which is often displayed following the Rule of 72.
The Rule of 72 as a Key to Profitable Investments
To put it, Rule of 72 is a plain mathematical tool, that measures the period estimated in years, for an investment to be multiplied by two at a constant ratio of return per year. Investors are able to estimate a given bond’s doubling time by using the formula 72 divided by the annual interest rate.
Formula:
It stands for the number of years, it will take to double the investment where • Years to Double = 72 ÷ Annual Rate of Return
Example:
An investment with a 14.4% annual return:
`Years to Double = 72 ÷ 14.4 ≈ 5 years`
It suggests that an investment would take about five years to double at an annual rate of 14.4 percent.
Operating the Rule on Tripling Investments
To determine the number of years needed to triple an amount of money, there’s the Rule of 114. Investors also use the tripling time formula in which one divides 114 by the annual interest rate to find out how the stock will triple.
Formula:
Tripled Years = 114 /Annual Rate of Return
Example:
An investment with a 15.2% annual return:
Years to Triple = 114 ÷ 15.2 = 7.5 years
This means that within seven and a half years an investment would grow three times at the rate of 15.2 percent annually.
Financial Investment Instruments to get the Expected Rates
To attain annual returns in the range of 14% to 15%, investors might consider the following options:
Equity Mutual Funds: These funds are used to purchase many stocks so as to give the investors an opportunity to earn large amounts of money. But they are at high-risk and more unstable than the stocks in the index.
Direct Stock Investments: There are good returns with high risk when investing in individual stocks especially those that are in growth industries. This approach calls for more research and has a greater risk-taking propensity.
Real Estate: Real estate especially in areas under development can generate a lot of returns once invested in. Real estate investments may demand a lot of money and therefore involve issue to do with liquidity.
Considerations and Risks
Higher returns are always desirable, though normally they are brought by more risk. High-return investment plans especially those with high risks need to be evaluated in terms of your tolerance to risks, length of investment, and the financial goals that you have in place. Taking the right financial risks can however be tackled if an investor diversifies his or her investment portfolio.
If you need professional recommendations and appropriate strategies for investments depending on your goals, financial planning should involve a financial advisor. Which can give recommendations of right investment plans to ensure one attains the envisaged wealth summit.