- Date : 03/08/2022
- Read: 3 mins
Find out how to evaluate and choose the best double your money scheme
Setting goals are a significant aspect of personal finance. How to earn money post-retirement and take care of emergencies and aspirations is a concern shared by most people.
But, with many options, from money double schemes and tax exemption schemes to mutual funds and stocks, it is a daunting task to choose the right one.
How to Evaluate Savings Schemes?
A simple formula, termed the thumb rule of 72, gives you an idea of your investment's time to double. Divide 72 by the interest rate of your proposed investment. To illustrate, consider the interest rate of 6.8%; therefore, 72 / 6.8 will give you 10.58. The result indicates that you can double your money in about ten and half years in that particular investment scheme.
Conversely, the formula also gives you the interest rate required for the number of years to double your investment. For example, if your money doubling target is five years, divide 72 by 5. The result 14.4 indicate a saving instrument with a minimum 14.4% rate of return.
Which scheme to invest in?
Critical parameters to consider are the rate of return, safety and legitimacy. The Post Office small savings schemes qualify under these factors; they offer better returns than bank FDs and are a safe investment to double your money. Some of the attractive post office schemes are:
1. Kishan Vikash Patra (KVP)
- Rate of interest: 6.9%;
- Maturity: 10 years and 4 months. Your money will double on maturity.
- Tax benefit: Low, as the interest is taxable.
2. Post Office Time deposit
- Return: 5.5% to 6.7% for a one-year to a five-year time deposit. Your money will double in eleven to thirteen years; however, you need to reinvest on maturity.
- Tax benefit: Section 80 C (of the Income-tax act) deductions allowed.
3. National Savings Certificate (NSC)
- Interest: 6.8%
- Maturity: Five years.
- Tax benefit: Up to Rs.1.5 Lakhs under Section 80 C.
4. Public Provident Fund (PPF)
PPF is among the best risk-free investment options, allowing tax benefits. You can open a PPF account at the post office or the branches of SBI and other participating banks.
- Interest: 7.1%
- Tenure: 15 years- can be extended in blocks of five years.
- Deposit limits: Minimum Rs.500 to a maximum Rs.1.5 Lakhs in a year.
Related: PPF, SCSS, Post Office Saving Schemes revised. Read the new rules
Other Savings Options
5. Bank fixed deposit
The average interest rate for deposits from 3 to 10 years is 6%; Investments double in 12 years.
6. Tax -Free bonds / Non-Convertible debentures
Average Interest: 5.5% to 8.5%, depending on the CRISIL / ICRA rating of the particular company. The time to double is about nine to thirteen years. However, NCDs have limited availability.
7. Mutual Fund / Stocks
Average Return: 12 to 20%; your money doubles in 4 to 5 years but carry a HIGH safety risk.
A proper investment plan matching your needs and goals helps you achieve your savings objectives. Under the present market scenario, the post office schemes offer a safe way to double your money quickly.
Read this Premium article to find out How recency bias impacts your investment decisions.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
