by Money doubling Scheme has been the most searched phrase in India for 2017 and 2018 and who do not wish to know the ways to double his/her money. Several Ponzi schemes are running which dupes investors in the name of doubling the money. These schemes lure innocent investors by assuring the high returns and vanish after trapping the investors.
But in this article, we will be covering the investment avenues which are genuine and known the investors. Here we will be talking about the long-term money doubling schemes which have been around from decades. But before going ahead let us first learn about the Rule of 72.
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What is Rule of 72?
Compounding, discounting, rate of returns, discounting rate, etc. are the words which are very familiar for commerce graduate but what about the people who only heard these word but does not know how to use them.
Rule 0f 72 come to aid by providing the approximate outcome of two calculations:
- The time to double the money at the given rate of return.
- The rate of return at which the money will be doubled in the given period of time.
Let us know how the Rule of 72 works:
Suppose you wish to know the time to double your invested money in a bank fixed-deposit giving interest at 7.20% p.a. By using Rule of 72 you can simply calculate that it will take around 72/7.20 = 10 years to double your money.
Similarly, if you wish to double your money in 7 years and wants to know at what rate of returns the money will be doubled in 7 years then as per Rule of 72, the required rate of return would be 72/7 = 10.28% p.a.
So this way Rule of 72 gives you the rough estimations and it becomes very handy at the times when you do not know the compounding or discounting formulae.
10 Best Money Doubling Schemes in India
Mutual Funds
The current inclination of the investors is towards Mutual Funds as the investment in mutual funds not only provides the superior returns over any other class of investment but with lesser risk. Apart from higher returns, investment in ELSS mutual funds also provides tax-savings under section 80 up to ₹ 1.50 lakhs per annum. So investing in Mutual Funds is a win-win situation.
If we talk about the returns, a person who stays invested for 18-20 years can easily garner the return of 12% to 15% p.a. (vary from fund-to-fund) At this rate of return, the invested amount in mutual funds gets doubled in 5 years to 6 years.
Bank Fixed Deposits
Bank Fixed Deposits are the first choice of conservative investors. Most of the senior citizens and retired persons have almost 50% of their retirement fund invested in Fixed Deposits.
The benefit of fixed deposits is that it is the safest option of investment and also provides tax-savings under section 80C up t0 ₹ 1.50 lakhs for the amount invested in 5 years tax-savings fixed deposits.
Currently, Bank Fixed Deposits provides returns in the range of 6.50% p.a. 8% p.a. and with this return, your money will be doubled in approx. 9 years to 11 years.
EPF/PPF
The retirement kitty of every salaried individual consist of Employee Provident Fund and since self-employed can’t have EPF so they should invest in Public Provident Fund in place of EPF for the retirement planning. However, both employee and employer contribute an equivalent amount of money in EPF but there is no such thing in PPF and the only taxpayer invests in PPF. Further, the EPF account bears a higher interest rate than PPF. But one trait that both EPF and PPF have is the safety of the investment. Both the schemes are governed by the Government of India and earned interest as well as invested principal is secured with no risk.
Currently, the rate of return for EPF subscribers is 8.65% p.a. and 8.00% p.a. for PPF investors. From the financial year 2016-17, the Government has stipulated to revise the interest rate on a quarterly basis for the small savings scheme. At the current interest rate, the invested money gets doubled in 8.25 years to 9 years.
Non-Convertible Debentures/Corporate Deposits
Recently several companies have come up with the subscription of non-convertible debentures offering rates up to 10.50% p.a. The returns are superior to bank fixed deposits but the risk associated with the investment is comparatively high. Investors who choose to invest in NCD’s or corporate Fixed Deposits should go through the prospectus thoroughly and look at the CRISIL, CARE of ICRA ratings before taking the investment decision.
Investing at 9% p.a. to 10.50% p.a. would double your money in approximately 7 years to 9 years. Point to note is that NCDs are issued both by Companies including NBFCs while corporate deposits are issued only by Companies.
Money Doubling through Real Estate
Real Estate especially additional house property or flat is very popular in India as an investment. But, buying a house property is not everyone’s cup of tea because it requires huge capital to invest and if the loan is taken then the tenure is long enough to run for entire life.
As for example if we talk about the investment of ₹ 2 lakhs in Real estate in Gurgaon in 1980, the same would fetch around ₹ 2 crores now i.e. CAGR of 15% over 34 years. Taking 15% returns p.a. the amount had doubled in every 5 years but this does not hold true with real estate investment because if we see the prices trend for 20 years i.e. from 1980 to 2000 the prices were rising very slowly but from 2001 to 2013 the prices have skyrocketed and multiplied 10 times.
Real estate investment is a long-term investment and to earn a considerable return, one needs to wait for at least a decade. However, this rule is not universal because returns from real estate are totally based on demand and supply. A place like Mumbai has become the financial capital of India whereas Nasik or other cities close to Mumbai are nowhere close to Mumbai in real estate prices.
Kisan Vikas Patra
Kisan Vikas Patra is a small savings scheme of Government and available across India in all the post-offices and major banks. KVP was first launched in 1988 for the farmers to save for their future but since then KVP was used to convert black money into white because KVP could be bought in cash and at the time of maturity only in accrued interest is taxed and the whole sum of money including the principal amount turns white. So the same is abolished in the year 2011 and was reintroduced in 2014 with a fix that now Aadhar is mandatory for buying KVP in cash and PAN is mandatory if the investment exceeds ₹50,000.
The minimum investment is ₹1000 with no upper limit and the current interest offering is 7.70% p.a. compounded annually. The interest rates are revised every quarter like PPF and EPF. At the current rate of 7.70% p.a., with the rule of 72, the invested amount gets double in approx. 9 years 6 months.
Capital Market/Share Market
Since the capital market is the riskiest investment option, there is a saying that “Return of Capital is more important than Return on Capital” i.e. safeguarding the invested amount is important than earing return on the investment.
There is no limit of the return one can earn from share market but the risk associated with it is enormous. There could be multi-fold returns or there could be the erosion of the capital completely in a year’s time. So rather than directly investing in the equity market, a newbie should choose equity oriented mutual fund to taste the waters.
However, if we the broader market i.e. Nifty returns for more than 2 decades are depicted in the image below.
Money Doubling through Gold/Gold ETFs
The glitter of the Gold is irresistible to overlook. Not only Indian Women gets attracted towards Gold, but men also have a huge inclination towards the gold. Although the investment in Gold is considered as a dead investment in India, tonnes of yellow metal is lying idle in the bank locker or at home. To mobilize this dead investment Government of India had come out with the Gold Deposit Scheme aka Gold Monetization Scheme.
Recommended Read SBI Revamped Gold Deposit Scheme 2019
If we talk about the return, Gold is highly volatile but considered safe bet at the time of turmoil in the market. Instead of being volatile, Gold has managed to give CAGR of 11.72% over the past 15 years i.e. doubling money in every 6 years.
Tax-Free Bonds
One for the best and secured investment option but unluckily no tax-free bonds have come for subscription in this financial year. However, the tax-free bonds are traded in the secondary market and can be bought through Demat Account. But these bonds are thinly traded and the returns are totally dependent on the prices you buy.
For example, Indian Railways Finance Corporation N1 Series Tax-Free bonds, which were issued at ₹ 1,000 are currently trading at ₹ 1,087 on NSE. The next interest due date is 15th October 2019 and the maturity date is 23rd February 2022. The coupon rate is 8% p.a. which is totally tax-free. The credit rating of the bond is AAA stable.
Similarly, HUDCO N2 Bonds which were also issued at ₹ 1,000 are currently trading at ₹ 1,141 bearing coupon rate of 8.20% p.a. and the interest due date is 5th March every year. The maturity date is 5th March 2027 and has a credit rating of AA+.
So, doubling money through tax-free bonds at 8% p.a. will take around 9 years. The benefit is that the interest is totally tax-free and there is no credit or default risk attached to it. The capital gain on buying and selling in the secondary market attracts the capital gain tax.
Post-Office Term Deposits
Post-office term deposits are similar to bank fixed deposit but are available only at post-offices across India. The POTD can be opened by cash as well as cheque and the maturity shall be 5 years. Currently, the interest rate is from 7.00% p.a. to 7.70% p.a from 1 year to 5 years. POTD is safe as Fixed Deposits and it offers guaranteed return charged at the time of opening account. You can avail the loan against POTD and also encash the POTD. There is no tax deduction under section 80C apart from 5 years post-office term deposits. For doubling money with POTD you need approximate from 9 years to 10 years.
