When we invest money, it is for the sole purpose of doubling it or hoping that it would give us guaranteed returns after retirement. But with various schemes in the market, it can be confusing for an individual to invest in a certain instrument.
If your money is invested in the right place, it can double or for that matter even triple in amount. There’s a simple rule by which you can tell how fast your money will grow – the Rule of 72 and 114.
The Rule of 72:
The Rule of 72 tells you the time it will take for your money to double. Just divide the rate of interest of the scheme by 72 to know the years it would take to double your investments.
PPF is offering an interest of 7.1% and you invest Rs 50,000 for the July-September quarter. Just divide 72 by the rate of interest (7.1%) to know the time it will take for Rs 50,000 to become Rs 1 lakh.
The Rule of 114:
This rule tells you how much time will it take to triple your money. Similar to Rule of 72, you have to divide 114 by the interest rate to know the number of years it will take to triple your return from investments.
Referring to the previous example, with a 7.1% interest rate from the PPF account, it will take 16.05 years for Rs 50,000 to become Rs 1,50,000.
Keep in mind, the Rule of 72 takes into account the annual return and can be applied across all durations provided the rate of return is compounded annually.