Growing her wealth in the shortest span of time is the dream of every investor. While this may sound fascinating, the fact of the matter is that in order to double your wealth the interest or return on your investment should be much higher than the inflation. So, now a question comes in your mind: how do I invest so that I can double my money? Is this possible to achieve in a short tenure? Where do I invest to double my money? and the queries go on. So, the answer is yes. And you can easily find out the time required to double your investments, using a simple and popular formula called ‘the rule of 72‘.
What is ‘the rule of 72’?
‘The rule of 72′ is the most commonly used formula in the investment market. It helps determine how many years will it take for your money to double at the given rate of returns. You divide the number ’72’ with the interest rate offered by your investment tool to get a clear idea.
For example, if you have invested in an instrument that generates a return of say, 15% per annum, with a principal investment of Rs 30,000, the amount will yield Rs 60,000 over a span of 72/12 = 4.8 years. So your money will double in nearly 5 years. This simple DIY (Do It Yourself) formula is extremely beneficial in comparing two investment options.
The various interest rates from your different accounts – savings, mutual funds, PPF, Sukanya Samriddhi Yojana, and NPS – in which your corpus is parked will determine the time taken for it to double.
For example, if your account earns:
6%, it will take 12 years for your money to double (72 / 6 = 12)
9%, it will take 8 years for your money to double (72 / 9 = 8)
12%, it will take 6 years for your money to double (72 / 12 = 6)
Doubling your money in 1 year
If you are an aggressive investor and wish to see your asset to double in a span of 1 year, then according to ‘the rule of 72’, you need to invest in avenues that provide annualized returns ranging between 70% to 72%.
Investment can be doubled in 2 ways
Doubling money requires a lot of calculations and speculations. It can be done in two ways.
1) The risky way calls for an aggressive investor who keeps an hawkish eye on the market. The stock market is an excellent option if you can stomach risk. Apart from it real estate and gold can also be considered.
2) Mutual funds, debt funds, bonds, fixed deposits are considered some of the safest methods.