National Mathematics Day 2021: The birthday (December 22) of the legendary mathematician Srinivasa Ramanujan is celebrated as National Mathematics Day.
National Mathematics Day 2021: The birthday of the legendary mathematician Srinivasa Ramanujan (December 22) is celebrated as National Mathematics Day. On this occasion, if we talk in financial language, then there are some formulas that can make you a millionaire, then some can arrange money for life. Legendary investor Warren Buffett once said that he had made his first investment at the age of 11 and before that his life was getting wasted. Not everyone is able to take the investment decision at such a young age. Investing from an early age is very beneficial but no time is considered late for investment, that is, from the time you start investing, it is the right time. However, while investing late, better options have to be selected so that the time lost without investing can be compensated.
Time and Return on Investment (ROI) are two important components for a successful investment. There are some math equations that can help a lot in reconciling both these components. These can go a long way in getting a better return on your investment.
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50-20-30 Rule
This rule helps in setting discipline for saving. Under this, half of the salary left with you after tax should be used for household expenses, 20 percent should be kept for short term goals and remaining 30 percent for long term goals.
15-15-15 Rule
This is the equation of becoming a millionaire. Under this, investors have to invest Rs 15,000 every month for a period of 15 years in such an option which gives a return of 15 percent. In the current circumstances, excluding cryptocurrencies, equities are the only option that fits perfectly into the groove of this equation. Although the return on investment in equities decreases in some years and increases in some years, but in the long run, great returns can be achieved. Individual investors can start a SIP (Systematic Investment Plan) of Rs 15,000 per month under this equation.
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Rule of 72
This is a simple rule and it calculates how long it will take to double money. The result that divides 72 by the expected return or rate of interest gives an idea of doubling your investment. For example, if equity is giving returns at the rate of 15 percent, then the money will double in 4.8 years (72/15) on investment.
Rule of 114
The amount of time it will take to triple your deposits is calculated from this equation. For this an idea of timing can be obtained by dividing 144 by the estimated return. For example, if you invest in an option giving a return of 15 percent, then money can triple in 7.6 years (114/15). The advantages of compounding have also been included in this equation.
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Rule of 144
For how much time you need to quadruple your deposits, you can divide by 144 by the estimated return to get an estimate. For example investing in the return option of 15 per cent will quadruple your money in 9.6 years (144/15).
100-age
This rule is for asset allocation, that is, how much of your capital should be invested in equities, this equation explains it well. Under this, the number obtained after subtracting your age from 100 is part of the equity allocation. For example, a person who is 25 years old should invest 75 per cent (100-25) of his investment capital in equities. It is implied in this equation that the risk taking capacity is high at a young age and the loss can be recovered. With age, the ability to take risks decreases.
(Article: Vikas Singhania, Director, TradeSmart. These are the personal views of the author and Financial Express Online takes no responsibility for the same.)
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