Power of Compounding: How long will it take your Rs 2,00,000 investment to turn into Rs 8,00,000? Know through this investment rule
Know how the power of compounding can turn a Rs 2,00,000 investment into Rs 8,00,000. Learn the Rule of 144 and understand compounding’s impact on long-term financial growth.
The power of compounding is a valuable financial concept that can significantly grow investments over time. By reinvesting earned interest, your initial investment benefits from exponential growth. If you’re wondering how long it would take for a Rs 2,00,000 investment to become Rs 8,00,000, the Rule of 144 offers an easy way to estimate this. Using a 12% interest rate, this guide breaks down how compounding works and the timeline to reach your financial target of quadrupling your investment.
Power of Compounding
The power of compounding refers to reinvesting interest earned on an investment, allowing the investment to grow exponentially over time.
Growth Impact:
- Interest earned adds to the initial investment.
- Reinvested interest itself starts earning returns, leading to faster growth.
Long-Term Benefits
Even with small initial investments, the compounding effect can substantially grow the investment.
Real-World Applications
Commonly used in retirement savings, investments, and long-term financial planning.
Rate of Interest and the Rule of 144
Interest Rate: 12% annual return.
Rule of 144
A simple formula to estimate the time for an investment to quadruple:
Formula
T = 144 / R (where T is time in years, and R is the annual rate of return).
Inverse Relationship
As the return rate increases, the time to reach financial goals decreases, and vice versa.
Example Calculation: Investment Growth at Different Rates
Investment of Rs 1,00,000 at 7% Return:
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Doubling Time: Approximately 10 years 3 months (using Rule of 72: 72 ÷ 7).
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Quadrupling Time: Approximately 20 years 7 months (using Rule of 144: 144 ÷ 7).
Doubling Time: Approximately 10 years 3 months (using Rule of 72: 72 ÷ 7).
Quadrupling Time: Approximately 20 years 7 months (using Rule of 144: 144 ÷ 7).
How long will it take Rs 2,00,000 investment to turn into Rs 8,00,000?
- To quadruple an investment, we can use the Rule of 144.
- With an interest rate of 12%, the time required is:
- T = 144 / 12
- T = 12 years
- T = 144 / 12
- T = 12 years
At a 12% annual return, it will take approximately 12 years for your Rs 2,00,000 investment to grow to Rs 8,00,000.