Every time you invest in a scheme, you can imagine how long it will take to double your money. If you put your money in the right place then it can grow a lot. It can double or even triple due to compound interest. But how long will it actually take?
It is true that the doubling or tripling of money calculation may not be completely accurate, but it can give an accurate idea about your returns from any investment. There is a simple rule that will tell you how fast your money can grow. These are Rule of 72 and Rule of 114. They can be used judiciously for taking investment decisions.
Rule of 72
This rule will tell you how many years it will take for your money to double. Its formula is simple. To find the number of years it will take to double your investment, divide the interest rate of the plan by 72. There should be a particular rate of return.
understand with this example
Suppose you are investing 50,000 in Public Provident Fund (PPF) this month. The central government has fixed the interest rate on PPF at 7.1 percent for the July-September quarter. Now you divide 72 by the rate of interest (7.1 per cent) to find the time taken for Rs 50,000 to become Rs 1 lakh, then it will be 10.14 for 72/7.1. Therefore, if the interest rate is fixed at 7.1 percent, your money will double in 10.14 years.
how to triple your money
So now if you are curious to know how long it will take to triple your money, you need to use the rule of 114. It works like the rule of 72. To find the number of years it will take to triple your return from investment, you need to divide 114 by the interest rate. Number of years required to triple your money = 114/rate of return. It will take 16.05 years from PPF account to become Rs 1,50,000 from Rs 50,000 with 7.1 per cent interest rate.
This rule is applicable only on annual return
It should be noted that the Rule of 72 is based on the annual return. It can be applied for all types of periods having annual returns. So if you apply this rule to calculate your quarterly or half-yearly compound returns, it will not give you accurate figures.
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