What Is Rule Of 72 And How It Helps In Calculating Investment Period In Different Schemes

Investing money wisely is essential for financial growth, and with a plethora of options available, it’s crucial to choose avenues that offer both safety and good returns. For those seeking to double their investments quickly, understanding the Rule of 72 can provide valuable insights into the time required for their money to double.

The Rule of 72 is a simple formula used to estimate the time it takes for an investment to double based on the given interest rate. By dividing 72 by the interest rate, investors can approximate the number of years it will take for their investment to double.

Let’s delve into some popular investment options and their expected doubling times based on current interest rates:

Bank Fixed Deposit (FD): With interest rates hovering around 8 per cent, bank FDs offer a doubling time of approximately 9 years.

Public Provident Fund (PPF): Offering an interest rate of 7.1 per cent per annum, PPF accounts will take approximately 10 years for the invested amount to double.

Sukanya Samriddhi Yojana: Recently increased to 8.2 per cent, this scheme promises a doubling time of around 8.7 years.

Kisan Vikas Patra (KVP): With an interest rate of 7.5 per cent, investments in KVPs will double in approximately 9.6 years.

National Savings Certificate (NSC): Offering an interest rate of 7.7 per cent, NSCs provide a doubling time of around 9.3 years.

National Pension System (NPS): With an average interest rate of 10 to 11 per cent, NPS investments have a quicker doubling time, averaging around 6.8 years.

These calculations highlight the importance of choosing the right investment avenue based on individual financial goals and risk tolerance. While options like NPS offer relatively quicker returns, they may involve higher risk compared to safer options like bank FDs or PPFs.

Investors are advised to carefully evaluate their investment objectives, risk appetite and time horizon before making any investment decisions. Diversifying across multiple investment avenues can also help mitigate risk and maximise returns over the long term.

Understanding the Rule of 72 can empower investors to make informed decisions and achieve their financial goals efficiently. By choosing investment options with favourable doubling times, investors can accelerate their wealth accumulation journey while ensuring the safety of their hard-earned money.