Know when your money will get doubled - the rule of 722 min read . Updated: 04 Oct 2020, 12:36 PM IST
- If you want to double your money in five years, your investments should grow at around 14.4% per year
- Kisan Vikas Patra will double your money in 10 years at current interest rate
Every investor wants to grow his wealth by as much as possible in the shortest period of time. The time span required to double your money would depend on the returns or interest rate earned on your investments. Obviously, higher the interest or return on your investment, faster will your money double. You can very easily find out the time your investments would take to double your money using a DIY formula called 'the rule of 72'.
Rule of 72 is a simple formula where you divide the number '72' with the interest rate offered by your investment instrument to get an idea on how soon can you double your money with that particular investment.
For an instance, a bank FD offering an interest rate of 5% p.a., will take over 14 years to double your money. The formula is applied as below:
Rule of 72
= 14.4 years
How much returns should your investments generate if you want to double your money?
Alternatively, by tweaking the formula a bit, you can find out returns required to double your money in a specific period. Let's find out:
If you want to double your money in three years, your investments should earn between 21% to 24% (72/3 years) every year.
Similarly, if you want to double your money in five years, your investments will need to grow at around 14.4% per year (72/5).
If your goal is to double your invested sum in 10 years, you should invest in a manner to earn around 7% every year.
Rule of 72 provides an approximate idea and assumes one time investment.
Time to double money under PPF, Sukanya Samriddhi Yojana, KVP, NSC, NPS and mutual funds
We have taken the current interest rates or returns offered by these instruments.
PPF at an annual interest rate of 7.1% will take around 10 years to double your money assuming the interest rate remains at 7.1% (72/7.1 =10.14).
Similarly, Sukanya Samriddhi Yojana will take around 9.4 years to double your money at the current interest rate of 7.6%.
KVP will take 10.4 years to double your money at the current interest rate of 6.9%.
National Savings Certificates at 6.8% interest rate will take 10.5 years to double your investments.
NPS Scheme C, Scheme G of Tier II account are giving on an average 11.5% returns in the one year period. Assuming similar performance, NPS will take 6.2 years to double your investments.
Short duration mutual funds and dynamic bond funds at present are giving around 8.5% returns in the last one year. Assuming similar returns, these instruments will take 8.4 years for your investments to double.
Debt medium to long duration mutual funds at 8.7% returns p.a, will take 8.3 years to double your investments.