How to Double your Money in 5 years?

How to double your money in 5 years in India in 2023?

You can use the simple concept of Rule of 72 to find out how much time it will take to double your money. Or if you tweak the formula bit, to know what returns you need to double your money in a given time period.

Using the Rule of 72 to find out how to double money in 5 years, the answer is that your investments need to generate 14.4% returns per year.

So if your question is that what interest rate would double your money in 5 years? The answer is 14.4% every year.

But do note that there are no financial products that offer such high guaranteed-returns. And hence to double your money in 5 years (and to generate high average annual returns of 14.4% or above), the only way is to take a bit of risk. But as I said, there will be no guarantees; which also means that in your effort to double your money in 5 years, you will be taking risk which may backfire and you may end up with losses as well.

We will shortly get to which instruments double money in how long a time.

But before that, I must say that there is something remarkably glamorous about the concept of doubling money. It gives a high to everyone to even think about it. Isn’t it?

Just try Googling for doubling money. It will throw up tons of further similar suggestions like:

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People indeed are in a real hurry to double their money! 🙂

As I mentioned earlier, you can use the Rule of 72 to figure things out a bit. Here is what it says:

Rule of 72: Divide 72 by the Expected Annual Returns

So you simply divide the number ’72’ with the interest rate you are getting from different investment instruments to get a rough idea of how soon can you double your money with that particular investment.

Or you can reverse the formula.

Since you want to double your money in 5 years, your investments will need to grow at around 14.4% per year (72/5). Or if your goal is to double in 10 years, you should invest in a manner to earn around 7.2% every year. Or if you are more adventurous and want to double your money in 3 years, your investments should earn about 24% every year.

Remember please that this Rule of 72 just provides an approximate idea and may not always be 100% accurate. But its still a useful dirty little thumb rule to keep in mind.

Now you have your answer to what rate of interest will double money in 5 years (answer being 14.4%). So lets see how much time do different savings and investment options take to double your money.

Double Money in Bank FD (2023)

Bank Fixed Deposits offer an interest rate of about 5% per annum these days. So using the formula of Rule of 72, we have 72 divided by 5 (i.e. = 72/5). And therefore, for a bank FD giving 5% returns, it will take 14.4 years to double your money.

Double Money in PPF (2023)

PPF (or Public Provident Fund) offers an interest rate of 7.1% per annum these days. So using the formula of Rule of 72, we have 72 divided by 7.1 (i.e. = 72/7.1). And therefore, for a PPF giving 7.1% returns, it will take about 10 years to double your money. If interested, here is the PPF interest rate history in India.

Double Money in Sukanya Samriddhi Yojana (2023)

SSY (or Sukanya Samriddhi Yojana) offers an interest rate of 7.6% per annum these days. So using the formula of Rule of 72, we have 72 divided by 7.6 (i.e. = 72/7.6). And therefore, for Sukanya account giving 7.6% returns, it will take about 9.4 years to double your money. Here is the Sukanya account interest rate history.

Double Money in EPF & VPF (2023)

EPF (or Employee Provident Fund) offers an interest rate of 8.5% per annum these days. So using the formula of Rule of 72, we have 72 divided by 8.5 (i.e. = 72/8.5). And therefore, for an EPF account giving 8.5% returns, it will take about 8.5 years to double your money. Here is EPF interest rate history and VPF interest rate history.

Double Money in Equity Mutual Funds (2023)

Equity Mutual Funds do not offer guaranteed returns. But historically, have been delivering a 10-12% average rate of returns annually. But it’s not exactly a smooth ride as equity markets can go up or down ever year. But 10-12% is a good estimate for returns from equity funds. So using the formula of Rule of 72, we have 72 divided by 10 or 12 (i.e. = 72/10 or 72/12). And therefore, for Equity funds giving 10-12% returns, it will take about 6-7.2 years to double your money.

Note – We are using fixed average returns but the actual equity returns are uneven and not in a straight line.

Double Money in Debt Mutual Funds (2023)

Debt Mutual Funds do not offer guaranteed returns. But historically, have been delivering a 7-9% average rate of returns annually. So using the formula of Rule of 72, we have 72 divided by 7 or 9 (i.e. = 72/7 or 72/9). And therefore, for debt funds giving 10-12% returns, it will take about 8-10 years to double your money. Often debt funds are considered as alternatives to bank FDs. And rightly so due to better taxation of debt funds using indexation benefits.

Double Money in NCD (Non-Convertible Debentures) & Corporate Deposits (2023)

NCDs and Corporate Deposits offer 8-11% average rate of returns annually. So using the formula of Rule of 72, we have 72 divided by 8 or 11 (i.e. = 72/8 or 72/11). And therefore, for NCDs and Corporate deposits 8-11% returns, it will take about 6.5-9 years to double your money. But higher returns of corporate deposits and NCDs come with their won share of higher risks.

Double Money in National Savings Certificates or NSC (2023)

NSC (or National Savings Certificate) offers an interest rate of 6.8% per annum these days. So using the formula of Rule of 72, we have 72 divided by 6.5 (i.e. = 72/6.5). And therefore, for an NSC giving 6.5% returns, it will take about 10.5 years to double your money.

Double Money in Direct Stocks (2023)

This is a difficult one to make any common comment on. Investing in stocks can be very fruitful if done well. People can double money in a month or two as well. But that doesn’t mean that its that easy. Generally, its not. I repeat. It might seem easy but doubling money in direct stock investing is hard. So for all practical purposes, consider return estimate of direct stocks as same as that of equity funds. So from that angle, 10-12% is a good estimate for returns from direct equity investments. So using the formula of Rule of 72, we have 72 divided by 10 or 12 (i.e. = 72/10 or 72/12). And therefore, it will take about 6-7.2 years to double your money in direct stocks.

Double Money in Real Estate (2023)

This is again very difficult one to make any general comments on. Different types of real estate investment offer different return experiences. And even the location (within and across cities/state) lead to different investment outcomes.

Double Money in NPS (2023)

NPS is a unique product that offers its subscribers an ability to decide their asset allocation between equity and debt. So the actual return will depend on the equity and debt % in the portfolio and using a weighted average of their expected returns. Equity portfolio of NPS can be expected to deliver 10-12% average rate of returns annually. Debt part of NPS can deliver 7-8% returns. Assuming 50% Equity and 50% Debt allocation in NPS, the average NPS returns can be about 9-10%. So using the formula of Rule of 72, we have 72 divided by 9 or 10 (i.e. = 72/9 or 72/10). And therefore, for NPS corpus giving 9-10% returns, it will take about 7.2-8 years to double your money.

And here is a ready reckoner of how your money doubles at different rates of returns:

Every investor wants to grow his wealth by as much as possible in the shortest period of time. And the attraction of doubling money can pull people towards ‘get rich quick’ schemes. But you need to protect yourself from making such mistakes.

Remember that for most people, the way to wealth is typically on the slow lane. Keep your expenses down, invest wisely and regularly, have a long term orientation and let compounding help you. You will surely see multiple doubling of your investments in years to come. So that’s about doubling money in 5 years in India in 2023.