Interest rate on highly safe small savings schemes by the post office are highly coveted owing to their safety and tax efficiency. Also, there are other investments which offer tax deduction together with high returns from exposure to equity such as NPS. Now when it comes to investments, the rule that decides when your corpus in a given scheme shall double, there comes into play ' Rule of 72'.
Rule of 72:
It is a formula based technique wherein by dividing the numeral figure 72 by the interest rate offered on the investment you would know, in what time the return shall double.
Now this formula can also be used alternatively, say you know the likely timeframe in which you wish to double your income flow, then you can divide the number 72 by that figure say 72/3 = 24 percent returns shall be yielded by the investment.
1. Debt medium to long term mutual funds:
These funds that typically lend funds to for a period of 4-7 years and hence a full economic life cycle is observed. The fund offers a return of up to 8.85 percent per annuum, so this mutual fund category can double an investors' money in 7 years and 6 months. Notably this mutual fund is fraught with risk.
2. Short term debt funds:
These funds typically can offer a return of up to 9 percent, so the time taken for money to double in this scheme shall be 8 years. Short debt funds park money in corporate for a shorter period of 1-3 years.
National pension scheme i.e. aimed at providing you social security benefits during your sunset years has as on May 14, 2021 offered 1-year return of 50-60 percent in case of Scheme E-Tier I account. If the returns remain consistent than the investor shall be able to double his corpus in just 1.44 years.
In scheme C, the maximum of return obtained in the NPS scheme is 9.5 percent on an average, so the time taken to double investors money in the Scheme C shall be 7.5 years.
4. NSC or National Savings Certificate:
NSC offers tax deduction as part of Section 80C and currently is offering an interest rate of 6.8 percent so the maximum time taken to double your money shall be =72/6.8, 10.5 years. NSC is among the post office savings scheme that is highly safe.
5. Monthly Income Scheme
Here with an interest rate pegged at 6.6 percent, the investment shall take a total of 10.91 years.
Similarly for other post office savings schemes it shall take between 9- 13 years as per the current interest rate offering to double your money.
NPS scheme with exposure to equity which on equity boom over the past year yielded returns of over 50 percent in the last one year, so it in a case if the returns sustain the scheme shall be able to double your money at the fastest rate. Similarly, MFs both short term and medium to long term will double your returns in 7 years and 6 months to 8 years.