Maths Shortcuts for Investors
This is a blatant poach from The Business Insider. But I couldn’t put it more interestingly or better myself!
Rule of 72
Need an easy way to determine how long it will take to double your returns? Simply divide the number 72 by your projected growth rate. So, if your returns are increasing by 10% per year, it will take 7.2 years to double in size.
Rule of 115
If you’re more inclined to triple your returns, because you’re not as risk averse (or perhaps your time horizon is just a tad bit farther out), simply take the number 115 and divide it by your growth rate. This will give you the amount of time it will take to triple your returns. So, if your returns are increasing by 10% per year, it will take 11.5 years for them to triple in size.
Rule of 70
The rule of 70 dictates how long it will take for inflation to halve the value of a rand. Simply divide 70 by your expected rate of inflation. For example, if you expect 3% inflation, then divide 70 by 3. At that rate, it will take 23.3 years before the value of your money is worth half what it is today.
Converting your salary to an hourly figure
You’re a salaried employee and trying to figure out how much that wage earns you an hour, maybe for that part-time job you’re considering taking on. Take your salary, drop the last three zeros and then divide by the number two. So if you earn R40,000, you’re left with R20 an hour. Numbers work best if you’re only working a 40-hour week.
Asset Allocation by Age
Don’t have a financial planner to walk you through [portfolio] asset allocation? A simple way to find out is to subtract your age from the number 120, the number remaining is the percentage of your portfolio that should be in stocks. For instance, if you’re 50, you should be keeping 70% of your holdings in stocks with the remaining 30% in fixed income products.