As the government on Wednesday made no changes in the interest rates on small savings schemes for the October-December quarter amid moderating bank deposit rates. Therefore, it is an interesting time for investors to look for investment options that yield better returns.
Therefore it is important to guide prospective investors for high-return investing options.
Firstly, a person has to decide on an investment tenure and the goal for which you want to invest.
For instance, if you are planning to invest in your child's higher studies, go for Sukanya Samriddhi Yojana or mutual funds or NPS Tier II. However, if you are planning to save for retirement, then switch to NPS, mutual funds or Kisan Vikas Patra (KVPs).
Once you select a scheme based on goal, and risk factor, look at return differential to select an offer that has the best returns. For that, a calculation method called 'Rule of 72' will be used to know how quickly it can double your investment.
It is a formula where we divide the number '72' with the interest rate offered by investment instrument to see how many years it can double your investment.
Let's use 'Rule of 72' for different schemes:
PPF:
This scheme is offering an interest rate of 7.1% p.a., therefore it will take (72/7.1 =10.14) roughly 10 years to double your investment.
Sukanya Samriddhi Yojana:
At the current interest rate of 7.6%, it will take (72/7.6=9.47) roughly 9.4 years to double your investment.
Bank FDs:
Using the same formula as mentioned above, and at a current interest rate of 5%, it will take 14 years to double your money.
National Savings Certificates:
At an interest rate of 6.8%, It will take 10.5 years to double the investment.
KVP
At a 6.9% interest rate, KVP will take 10.43 years to double your money.
NPS Scheme C, Scheme G:
It will take 6.2 years to double your investments on the current interest rate.
Short duration mutual funds and dynamic
Assuming returns of 8.5%, it will double the investment in 8.4 years.
Debt medium to long-duration mutual funds
At 8.7% returns, it will take 8.3 years to double your investments.
According to a Print report, although schemes listed above might not provide a long maturity period to let you double your investments at the current interest rates, but the exercise will help you choose an alternative of bank FDs and also understand expectations from your investments.
