With the plethora of personal finance sites and the wealth of advice floating around on the web, given by your bank, or insisted upon by your advisor, sometimes it helps to take a step back and do a broad check to see if overall, you're doing the right things.
This is where general thumb rules can save you time and let you know if broadly you are on the right track.
But remember, by saving time, you are effectively taking a short cut. Thumb rules are imprecise. They are generalizations, and may not specifically apply to you. For personalized advice, you need to speak with your personal financial planner for a financial solution to your specific situation. So is there an in-between solution for people who don't yet have a personal financial planner and don't want to follow only broad generalizing thumb rules? Yes there is.
This article will show you some lesser known, more precise thumb rules that will still save time, and will be better for your personal finance situation than just a broad guideline. Let's see what these thumb rules are:
The more appropriate and still easy thumb rule is this:
3 years or less left for your goal = No Equity Exposure. |
Rate of Return = 72 / Number of Years to Double Money
...and this calculation would tell you that the product the advisor is recommending should be giving you an annual return of 72/8 i.e. 9% p.a.
This is quick, but the reason the number 72 is chosen is because it is easily divisible by many denominators and because it is close enough to the real number, which is 69.
So the more accurate rule is:
Rate of Return = 69 / Number of Years to Double Money |
PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.
PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.
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Sunita
Apr 17, 2014Very good and helpful to plan the financial goals.