Investing can be defined as the act of putting your money in different avenues like real estate, financial assets etc with the expectation of growing your money and making profits. In other words, resource allocation as per your risk-return profile is known as investment.
Every investor wishes to double his/her money in the shortest possible time. However, in reality, doubling your money requires patience, discipline, and most importantly the ability to identify the best investment options as per your risk appetite.
Before we delve deeper into the tricks of the trade to multiply your money, you should calculate the average doubling period by using any of the following thumb rules:-
- Rule of 72 :
Doubling period = 72 / Interest Rate years
- Rule of 69 :
Doubling period = 69/Interest rate + 0.35 years
In both of the above methods, annual interest rate is fixed and compounded continuously.
These formulas do not consider the risk factor but will give you a fair idea of the number of years you need to remain invested to double your wealth.
Five Investing Tricks to Double Your Money
1. Invest in stocks/shares/direct equity
- The historical patterns of the past decade have continuously proven that stock market investments have the potential to generate higher inflation-adjusted returns as compared to those generated by other investment avenues. Blue-chip stocks have emerged as the biggest wealth creators with some of them generating 5 year returns of 50% and above.
- You can start investing in stocks by opening a Demat account online at zero charges. You should also open a low brokerage trading account to save a significant amount of transaction costs.
- However, since the risk component of stock market investments is high, you must be well aware of the basics of fundamental and technical analysis.
- In addition, be cognizant of the fact that longer your investment period higher will be your rate of return from stocks.
2. Go for Mutual Fund(MF) Investments
- As per the rules of investment, you should hold a diversified investment portfolio to lower your risk component.
- However, if you are an amateur with zero knowledge of portfolio allocation strategies, MFs are the best option for you. Fund managers invest the pooled investor money in different industries and companies.
- There are different types of mutual funds tailored to different risk-return profiles like Debt Funds, Equity funds, Hybrid funds etc. Subject to market volatility and risks, MFs generate average returns of 15% p.a. and can double your money in 6-8 years. Equity Linked Saving Schemes (ELSS) will give you tax benefits too.
3. Adopt the safe way if your risk appetite is low
- If you are against speculative investments and have a longer doubling period at your disposal, you can go for nearly risk-free options like Fixed Deposits, Zero Coupon Bonds, or National Savings Certificates (NSC) issued by Postal Departments.
- The current interest on NSC is 6.8% p.a. with a minimum lock-in period of 5 years. Current FD rates range between 5%-7% for varying maturity periods.
- NSCs and Tax Saver FDs are eligible for tax deductions under Section 80C.
4. Invest in Non-Convertible Debentures(NCDs) or corporate deposits
- NCDs and Deposits of corporates or Non-Banking Financial Companies with good credit ratings offer a higher rate of interest than traditional Bank Fixed Deposits.
- NCDs are highly liquid, eligible for Tax Deducted at Source (TDS), and have a minimum lock in period of 90 days.
5. Invest in Kisan Vikas Patra
- Initially formulated for farmers, this post office investment scheme is now open for all. Post 1st April 2020, if you invest a lump sum amount today, this investment scheme will double your money in 124 months.
These are some of the investing tricks to double your money.