Double Your Money With Mutual Funds

The major viewpoint of investments is to increase the value of your wealth to meet future financial goals and needs. Mutual funds have been a testament to the increasing desire for investment among people in India.A good number of you may have looked at the prospect of increasing the value of your money by double or even multifold by putting it into mutual funds and the market. So what’s all this rave about doubling your money? Find out how to double your money in mutual funds down below:

Doubling your money is a simple way to increase your investment value by two times, giving you a 100% rise in the initial investment. It's certainly one of the bragging rights for an investor and something you should all aim for. Knowing that you can double your money can be a great learning to uplift your portfolio as an investor. And it doesn't take rocket science to find it out. All you need to know is the Rule of 72.

Rule of 72 is one of the traditional rules used extensively to calculate the period for doubling your money. Although numerous spreadsheets and scripts have developed over time, that can do mammoth calculations, the Rule of 72 still comes in handy for mental calculations and quick answers. It's a simple rule which can be represented by the formula mentioned below: Years to Double (n) = 72/ Interest rate (r) Here, n denotes the number of years, and r represents the return rate for the investment.

Computing the years to double the money can be a tough ask for normal people who are not well acquainted with the terminologies of investment. This may create a hurdle for them. Furthermore, with the use of Rule of 72, an average investor can compare multiple investments based on the rate of return for them and pick the right choice. It’s an efficient means for computing the complex scenario of investments and simplistically presenting them. Example of Rule of 72 Let’s take a look at different scenarios down below:

• Rule of 72 Formula to Calculate the Number of Years (n = 72/r) The first scenario is to simply find out the number of years required to double up your money. This can be done by using the formula (n=72/r), whereby you can insert the value of the rate of return provided therein. Let's take the table mentioned above as an example and find the required fields.As per the Rule of 72, the time required to double your money at 15%, 12%, and 10% rate of returns are 4.8-years, 6-years, and 7.2-years. This gives a brief idea of how long your funds need to be invested to double it.
• Rule of 72 Formula to Calculate the Required Rate of Return (r = 72/n) The Rule of 72 can not only be used to calculate the years required to double the money but can also be used to calculate the required rate of return for doubling the money. Turn the equation around, and you'll get; (r=72/n). Let's understand this with an example.Using the Rule of 72, you can calculate the rate of return required for doubling your money. For instance, if you want to double your money in 3.6 years, you should look for a mutual fund with a 20% return rate on average.

Invest in Mutual Funds as per Your Goals and Risk Appetite

The Rule of 72 gives a clear view of the period required for doubling your money based on the rate of return. This helps to plan your investment and set goals accordingly. As lucrative as it may seem, going for the fastest route to doubling your money in a mutual fund is not the right way to invest your money.A rule of thumb - the higher the fund's return potential, the higher will be its risk quotient. Spread your investments across different asset classes to ensure you have a well-rounded portfolio. The Rule of 72 should further help you identify the time you may need to reach your financial goals.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.