Doubling your money is a badge of achievement that is frequently utilized as a source of pride at celebrations and around the dinner table. Overzealous consultants, or worse, scammers and fraudsters, can also make false promises to quadruple one’s money. Perhaps the desire to double one’s money stems from a fundamental component of our investor psychology—the risk-taking side of us that craves a quick buck. When it comes to efforts to do so, however, two crucial interconnected components must be considered: time and risk. This refers to both your (investing) time horizon and risk tolerance, as well as the characteristics of the investment itself, such as the time it may take to double, which is a consequence of the riskiness.
Thumb Rule of Doubling Your Money
There is a common formula for calculating how many years it will take for your money to double. It’s known as the Rule of 72.
T=72/R (where T is the time it takes to double your money and R is the interest rate on your investment).
If R is 12%, the time it takes to double your money is 6=72/12. You may use this method to compute the rule of 72 at random or to determine how many years it will take for your money to double.
Double Your Money, Easily
Yes, it is possible to double your money in a short period of time. There is no doubt about that. But the most important question you must ask yourself is WHEN or AFTER HOW MANY YEARS.
Let us consider a few examples: if you invest in various assets, how long would it take to double your money?
- If you keep your money in a savings account with a return of roughly 4%, it will take you 18 years to double your money.
- If you store your money in a bank FD with a yield of roughly 6%, it will take around 12 years to double your money.
- If you store your money in a PPF (where the returns are around 7.1 percent), it will take around 10.14 years.
- If you put your money in an EPF (where the returns are around 8.5 percent), it will take around 8.47 years to double your money.
- If you put your money in equity (stocks or mutual funds) (where returns are around 10%), it will take around 7.2 years to double your money.
You see that it is simple to double your money in each asset or product. However, the thing to consider is WHEN and HOW LONG IT WILL TAKE. Never fall into the trap of expecting the money to double instantly. Instead, consider how long it will take to double. Especially when it comes to selling a few financial items or real estate, vendors will constantly strive to draw your attention to this strategy. Because our minds are naturally drawn to this type of cognitive process since infancy.
People that claim that you can quadruple your money in 24 hours, are lying to you. Many frauds have occurred, are occurring, and will occur all over the world, just because we are GREEDY.
So, always try to comprehend the dangers inherent with such enticing plans or assets. Wealth creation is tedious but not exciting. If someone claims that he or she would double your money faster than the bank FD rates, you should be wary. That is why the likelihood of your money double is increasing. Try to comprehend the danger, whether it is a bank FD, an equity investment, or any other programme that uses eye-catching sales taglines to entice you.