Rule of 72 – Learn How to Double Your Money
Financial planning is essential before investing to find out the best-fit investment instrument for you. Studying the market fluctuations, the rate of returns, and the tenure help in this planning.
In the market, there are a lot of ways to invest and grow your wealth, and every investment instrument is unique. A few might give you high returns, while others will give you comparatively lower returns. Similarly, a few might involve more risk, but others might be of less risk. Nevertheless, experts have come up with methods that will help you to pick the right instrument. There are also ways to calculate the returns from any investment plan. One such rule is the rule of 72. Read through to understand the various ways to double your money and the rule of 72.
Ways to Double your Money
Every investment option carries a certain amount of risk, and they all offer attractive interest rates. Let us see a few examples of which financial instruments you can pick to double your money.
- Fixed Deposit
- Physical gold
- Digital gold
The most common way chosen by many people across the country is to invest in fixed deposits. They offer a stable rate of return with a predetermined tenure and are considered one of the safest ways of investing. However, the interest offered on fixed deposits is quite low when compared to other attractive financial instruments. Yet, this method is more valuable than a traditional savings bank account scheme.
Money invested is locked for an agreed tenure, and on maturity, the money is returned to the individual. The matured amount will have the interest accumulated on a compounded basis. Normally, the interest will be calculated every quarter and credited to the deposit account. The maximum tenure available for the investment is ten years.
Even though they are one of the safest ways to make investments with stable returns, this instrument also has few downsides. FDs come with longer tenure and a lower interest rate, making it difficult for an individual to double the money quickly. Also, breaking the FD mid-term attracts penalty charges. This is the main drawback of fixed deposits amongst all the other ways to double your money.
Gold is always a good option when it comes to financial planning and investment. For quite some time, investing in gold has been one of the best ways of saving money and growing wealth. Due to the consistent appreciation value of gold, any individual can invest in gold at any time as there will be a certain increase in its value in the future. Hence, investing in gold now and selling it after a few years will eventually give you higher returns.
One downside of investing in physical gold is its costly nature, that makes it difficult to handle or store gold. Even if you opt for a bank locker to store your gold, you’ll have to pay a monthly or annual charge. This is why some individuals do not prefer to invest in physical gold to double their money.
Digital gold is another great option of investment to double your money. It has come into popularity because of the benefit of safely buying and selling gold from anywhere. Many government-approved vendors are serving as a platform to buy and sell digital gold. Nowadays, even banks provide the facility of a digital vault, where their customers can buy and sell gold anytime. The investors buying digital gold will be given a value equivalent to the money they invested. The gold is stored in a secured vault, and the investor cannot manipulate it.
The amount of digital gold allocated for a customer will only be available in the customer’s digital vault. If the person wishes to sell the gold, he can sell it back to the vendor at the rate of gold on that day. The vendor charges an amount as a commission when buying and selling digital gold. The main benefit of this instrument is that it is more secure. There are no making charges associated with digital gold, as there are with physical gold.
Whenever the customer wants to convert digital gold to physical gold, they can raise a request to the vendor to convert the value to an equivalent gold coin or bar. However, it cannot be converted into ornaments. This is one of the biggest disadvantages of this financial instrument.
Rule of 72
The rule of 72 is a handy way of estimating the number of years it would take for an amount invested in a financial instrument (such as equity, bonds, fixed deposits, or any savings scheme in general) to double. An inherent assumption here is that the invested amount is growing at a compounded rate of interest.
For example, if you are investing Rs. 1 lakh in a financial instrument and would like to know when this money will become Rs. 2 lakhs, you can use this method to calculate the same. The Rule of 72 can be expressed simply as:
Time for Investment to double = 72Rate of Interest (compounded annually)
If you are an aggressive investor and want your investment to grow at a fast rate, the rule of 72 is a handy way of calculating the number of years it would take for your invested amount to get doubled. The rule of 72 makes the choice of investment easier for you as it gives you a more quantifiable idea of how fast your money would grow in different investment instruments.
Is it possible to double the money with a savings bank account?
Yes, it is possible to double the money in any financial instrument if there is an interest offered. However, due to the low interest offered in savings bank schemes, it takes a lot of years to double the money. For example, assuming you have 1 lakh and your savings account offers you 3% interest, your money will be doubled in 1 * 72/3 = 24 years.
Will the rule of 72 provide an assured tenure?
The rule of 72 is only a method to arrive at a calculated amount based on the interest offered. However, the interest rate is directly impacted by external factors and market fluctuations. Therefore, if there is a change in the interest offered, the resultant tenure obtained from the rule of 72 is subject to change.
Can I invest in mutual funds to double the money in the short term?
Most mutual fund instruments offer high-interest rates. Hence, there is a chance to double your funds within the short term. However, mutual funds are riskier instruments, and assured amounts might not be returned.
Is buying land a good idea in 2022?
Similar to gold, the value of property faces consistent appreciation. Hence, it’s always a brilliant idea to buy land as an investment idea. Over the years, the value of the land will increase drastically.
Can post office schemes help in doubling my money?
There are a lot of schemes offered by post offices to double your money. One such scheme is Kisan Vikas Patra (KVP).