NEW DELHI: If you want to know how long it takes for your investment to double, you should know the rule of 72.
This is a simple formula which tells you how many years before your investment doubles. This can be arrived at by dividing 72 by the rate of interest offered by that particular instrument.
For example, you want to know in how long will it take for your money in public provident fund (PPF) to double. PPF is offering 7.1% interest, and the rate is reviewed quarterly by the government. Assuming you get an interest rate of 7.1% throughout, if you divide 72 by 7.1% you will get 10.14 years. So, at the current rate of interest , your money will double in 10.14 years.
Let’s understand how much time your money will be doubled by investing in different instruments.
National Savings Certificate (NSC): NSC is offering an interest of 6.8%. By investing in NSC, you will be able to double your money in 10.58 years.
Senior citizens savings scheme (SCSS): SCSS is offering an interest rate of 7.4%. You will be able to double your money in 9.72 years.
Therefore, you can see that the higher the interest, the less will be the time you will need to invest in a particular instrument to double your money.
So, if you want to double your money sooner, you need to invest in an instrument which is giving a higher rate of interest.
However, always remember that higher the rate of interest, the more is the risk and vice versa. So, equities can deliver higher returns but they carry a higher degree of risk as well.
(Do you have a personal finance query? Send in your queries at [email protected] and get them answered by industry experts.)
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