Updated on: September 11, 2021 ; Wealth & Value
Rule of 144:
Continuing with the flow from the previous articles, we will look at a shortcut to calculate the investment quadrupling time. We popularly know this shortcut as the Rule of 144.
It provides a quick way of roughly computing your investment quadrupling time. This helps you calculate how many years it will take to quadruple your initial investment value. All you have to do is simply divide 144 by the rate of return (you have to consider the rate as integer and not as a percentage). And you get the number of years needed to quadruple your investment.
If your rate of return is 8%, then you divide 144 by 8 (not by 0.08). You get 18 years as the time required to quadruple your initial investment value. Do keep in mind that this is just an approximate rule for the back of the envelope calculation.
Let’s take a look at how did we come up with this approximate rule of 144. The table below lists the exact time required to quadruple your investment (in years) for different ‘rate’ scenarios.
The last column is the number you get when you multiply the time (in years) and the required rate needed for quadrupling your investments. This is the backward calculation to figure out the magic number.
If you look closely, you will notice that this number lies in the range of 139 to 150 for reasonable returns rates (1% to 17%). Normally, you would expect your investments to have a return rate of 8%-15%. This is what I am terming as the reasonable return rate. So, 144 is the accepted norm.
You can also notice that this number increases as the rate starts to climb up. It almost touches 155 as the rate approaches 24%. So, if your expected return is in that range, I would advise you to change the factor to 150-154.
So, now you know how to quickly compute your investment quadrupling time. Also read the rule of 72, which is a quick way to compute investment doubling time, and rule of 114 (investment tripling time).