Every investor wants to become rich and amass huge wealth in the shortest period. In this article, we will tell you how much time it would take to double your money. There’s a simple thumb rule for it known as the ‘Rule of 72’.
Rule of 72
The ‘Rule of 72’ gives you an estimate of the number of years it will take to double your money in a particular investment tool. You need to divide the rate of returns by 72 to know the time it would take you to double your investments.
Time to double money under Bank fixed deposits (FDs)
Almost all banks provide fixed deposits ranging between 7 days to 10 years tenure. The interest rates vary from one bank depending upon the tenure. SBI, ICICI Bank FDs between 7 days to 10 years will give 3% to 7.1%. HDFC Bank offers an interest rate ranging from 3% to 7.25.
Suppose you want to invest ₹1 lakh in a bank fixed deposit. So, if we assume, a bank FD offering an interest rate of 7% p.a., it will take over 10 years to double your money. The formula is applied as below:
Rule of 72
=72/7
= 10.28 years
So, an investment of ₹1 lakh in a bank FD will get doubled ( ₹2 lakh) in ten years assuming a 7% interest rate.
Time to double money under PPF
At present your Public Provident Fund (PPF) deposits fetch you 7.1 per cent. The interest rates on PPF have not been revised since April 2020. PPF will take around 10 years to double your money with 7.1%. The formula is applied as below:
Rule of 72
=72/7.1
= 10.14 years
Time to double money under equities
If we consider Nifty50, it has given a 13.5% return in the last year, and 80% in five years. So, an investment of ₹1 lakh in equities will double ( ₹2 lakh) in five years assuming a 5.33% interest rate. The formula is applied as below:
Rule of 72
=72/13.5
= 5.33 years
Time to double money under Mutual Funds
Money experts say that if one remains invested in a disciplined way, in the long run, mutual funds can give around 12-15% returns.So, an investment of ₹1 lakh in MFs will double ( ₹2 lakh) in six years assuming a 12% interest rate.
The formula is applied as below:
Rule of 72
=72/12
= 6 years
With this DIY formula, investors can very easily find out the time their investments would take to double their money.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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Published: 23 Sep 2023, 02:58 PM IST
