Seeing the investment getting doubled in a year is a dream of many investors but does it happen? People out of greed try to adopt several things and that eventually leads to loss of money. Now the answer to the question is Yes, there are many ways by which you can double your money in a short span of time. While talking about wealth doubling in a short time, the first thing people suggest is, The Rule of 72, because it helps determine how much time it will take to double your invested money at the given rate of returns.
How does the rule of 72 work?
So, the rule is extremely helpful in comparing and choosing the right thing to invest in as it provides one with the right answer for faster results. For example, if you want to invest in a particular organization that gives a return of say 12% per annum with an investment of 40,000 then your 40,000 will turn in 80,000 over a span of 72/12-6 years. If you are someone who wants to invest a big amount and want it to be doubled in a time period of a year, you must invest in avenues that provide annual returns of 70% to 71%.
Rule of 72 & super Mario personal finance lessons. (Source: The financial literates)
Investing your money is a great idea but without knowledge of how it should be done is very risky, one should always learn about it and then start investing their hard-earned money into anything.
Let’s understand what are the 7 steps of the investment process that one should follow before investing:
1. Start small
Investing a small amount is a good thing till the time you become a pro in the process. That’s how you become used to investing and also learn how it works and what the risks it contains, so investing less is a good idea in the start.
2. Determine your needs
Before investing your money you should analyze how liquid your money needs to be, or how fast you’ll be able to access it when needed. The financial situation of a person has a great impact on investing which should be examined while investing
3. Investment Goal
At the time of investing one should always know the goal of the investment or the purpose for which you are investing the money, is it the next year’s vacation or a retirement fund, as long-term and short-term investments are considered differently.
4. Risk tolerance to be understood
It is always said that the higher the return the higher the risk so if you are going for a high rate of returns you should always prepare yourself for the loss of the same as well.
5. Special risk consideration: Inflation
Inflation is considered a special risk that can ruin the flow of your investment as it’s not predicted before and you should always be ready for such risk.
6. Check up
The account’s performance should be checked on a regular basis and include your investments after checking your budget.
7. Do your homework
Before investing you should always learn and do understand the particular form of investment. You should always know where you are investing.
Till now you must have understood a lot about investment and are ready to invest your money but wait, there are a few more things that be understood such as investment yield, 80C investments, etc. Investment yield means the income generated by an investment, separate from the principal. Yield is considered as a percentage of either the investment's market value or the purchase price. Investing in stocks based on their yield could prevent you from having to sell shares to generate income. In a market downturn, this can help you avoid selling shares at a loss.
Section 80C deduction (Source: ET money)
Whereas the 80C is the clause of income tax of India which points to the various expenditures and investments. Section 80C of the income tax act allows tax exemptions on infrastructure bonds, provided the investment is equal to or higher than 20,000. The limit of Rs.1.5 lakh stays applicable for these long-term secured bonds as well.
Several investment schemes can be used for investing, starting from 500 a month and the list then goes higher. You can invest according to your financial situation.
There are several safer methods by which you can double your investment, not in a year but surely in very less time:
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Mutual funds
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Debt funds
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Company fixed deposits
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Bonds
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Bank fix deposits
Some riskier methods of doubling your money include:
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Stock market
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Start-up partnership
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Gold and digital gold
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Real estates
If you are looking for government schemes with a high rate of returns, the benefits of investing in government schemes are that they are risk and hassle-free and if invested at right time maximum profit can be earned.
Some Government schemes for investment are:
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Atal Pension Yojana(APY)
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Public Provident Fund(PPF)
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National Saving Schemes(NSS)
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Sukanya Samriddhi Yojana(SSY)
Being alert and careful while investing is the key that one should always keep in their mind. Investing for the longer term is always better since it helps you ride out the market cycles with ease and lesser heartburn. Short-term volatility can impact your mental wellbeing on a daily basis and affect the very work that gives you surplus money to invest.
Concentrate on earning money and then let the money do its job by growing, while you do yours. Happy Investing!
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