Top 10 Thumb Rules For Investing Every Investor Should Know

Investing smartly helps you grow your wealth, multiply your existing savings and prepare for important life goals like a comfortable retirement, buying your dream home or paying for your child’s education.  While investing is important, doing so without direction can end in poor results, missed opportunities and, ultimately, financial insecurity. Following basic thumb rules for investments can help you ensure your investments are well-directed and offer you maximum benefits. 

In this article, we explore the top 10 investing rules of thumb so that you can invest consciously and fruitfully. 

1. Rule of 144 

The rule of 144 is a simple investment thumb rule that helps you calculate how many years it would take for you to quadruple your investments. To calculate the time period, simply divide 144 with the return rate of your investment product. You can use this rule when evaluating your long-term investment options. 

2. Rule of 72 

Similar to the first rule, the rule of 72 helps you estimate the general growth potential of your investment. Divide 72 by the annual rate of return on your investment to calculate how long it will take before your investment doubles in value. 

3. Rule of 70

Inflation, if not factored in while investing, can slowly erode your savings. Divide 70 by the current inflation rate to estimate how many years it will take for your current purchasing power to be cut in half. This information can help you invest in a way that outpaces inflation. 

4. The Emergency Fund Rule 

Emergencies can strike at any hour. This rule suggests that you put aside at least 3 to 6 months' worth of living expenses to provide you with a buffer when times get difficult. 

5. 10 Percent for Retirement Rule 

The 10% rule of thumb for retirement savings recommends that you save at least 10% of your pre-tax income towards your future retirement goals. Doing this consistently can help accumulate a large corpus through the power of compounding. 

6. 100 Minus Age Rule 

According to this rule, when you subtract your age from 100, the number you get is the total percentage of your portfolio that can be allocated to equities or high-risk investment options. As you grow older, this number diminishes, suggesting you should invest in lower-risk options. 

7. 10, 5, 3 Rule 

The 10, 5, 3 Rule helps set realistic expectations for investment by anticipating an average annual return: 10% from equities, 5% from bonds, and 3% from fixed deposits. This rule encourages you to approach investments with a balanced strategy. 

8. Rule of 114

This rule helps calculate how long it will take you to triple your investment. To find out, simply divide 114 by your annual rate of return to get an approximate time frame. 

9. 4% Withdrawal Rule 

If you are retired, the 4% rule can help you make your retirement savings last for longer. It suggests that you withdraw 4% of your retirement savings annually while adjusting for inflation so that you have a steady income stream while preserving funds for the long term. 

10. Net Worth Rule 

The net worth rule is a benchmark to assess your overall financial health. To calculate it, subtract your liabilities from your assets. Ideally, this number should be equal to your age multiplied by your annual income divided by 10. 

Final Thoughts 

These 10 investing thumb rules allow you to make smarter choices, allocate your assets appropriately, and manage your investments effectively.  To make your investments even more effective and to maximize your returns, invest through reputed platforms like Tata Capital Moneyfy. 

Tata Capital Moneyfy offers a secure and reliable platform with a diverse range of investment options to grow your wealth , diversify your portfolio and reap the full benefits of your investment choices. To know more, visit the Tata Capital Moneyfy website or download the Tata Capital Moneyfy App today!