Because of the influence of compound interest, if you put your capital in the right ways, it will rise significantly over the years. A secure investment is one that involves little to no uncertainty. They are usually appropriate for individuals who are retired who do not want to welcome risks. Currently, there are many equity opportunities available in the market that offer decent returns while still providing tax advantages. Small savings schemes such as PPF, Sukanya Samriddhi Yojana, Senior Citizens Savings Scheme, NSC, and others are popular investment strategies for risk-averse investors. For investors with a low-risk appetite, there are bank FDs and debt mutual funds in addition to small savings schemes. That being said, in order to choose the right choice for you, you must first assess your investment period and financial objectives. If you're still not sure which one to go for, look at the return factor to see which one has the highest returns across the shortest period of time. The easiest ways to do this is to figure out how long it takes each investment product to double your money. It would be easier to choose a scheme until you know which strategy will double your holdings the fastest. You can simply achieve this by using the 'Rule of 72.'
What is "Rule of 72"?
The Rule of 72 is an easy way to calculate how long it will take for an investment to double the fixed annual rate of interest. Investors can get a rough estimate of how much time it will take for their investment to double by dividing 72 by the annual rate of return. This rule is commonly used in instances concerning compound interest. It should be noted that a simple interest rate does not fit effectively with the Rule of 72. Bank FDs are presently providing around 5% interest to regular investors. If you want to deposit Rs 5 lakh in a fixed deposit of a bank with an interest rate of 5%, divide 72 by the interest rate of 5% to find out how long it will take for Rs 5 lakh to double. So 72/5 equals 14.4 years. As a result, if the interest rate is 5%, the money will double in 14.4 years. If your average annual equity return is 15%, your investment will double in 4.8 years (72/15). The thumb rule is typically applied to fixed-rate instruments rather than volatile asset categories such as equities. You can also use this rule and find out how much interest rate you need to double your money in a certain period of time. For instance, suppose you want your money to double in ten years. 72 divided by ten equals 7.2 per cent. To double your money in ten years, you'll need a 7.2 per cent interest rate.
Types of fixed-income instruments that double your returns
Here are several investments that can double the returns of your investments in a certain period of time.
|Fixed-income instruments||Current ROI||Rule 72||Money will be double in|
|Bank FDs||Around 5%||72/5||14.4 years|
|Public Provident Fund (PPF)||7.10%||72/7.1||10.14 years|
|Sukanya Samriddhi Yojana||7.60%||72/7.6||9.47 years|
|Kisan Vikas Patra||6.90%||72/6.9||10.43 years|
|National Savings Certificate||6.80%||72/6.8||10.5 years|
|5-Year Post Office Recurring Deposit Account (RD)||5.80%||72/5.8||12.41 years|
|Senior Citizen Savings Scheme||7.40%||72/7.4||9.72 years|
Note: It is important to note that the Rule of 72 should be used to make financial calculations and take into account the nature of compound interest. As long as the interest rate is less than around 20%, the "rule" is pretty effective.