Do you know anything about Rule No. 72 in mutual funds? If you answer no, then let me know about it. The question that comes to the mind of many investors is how to start investing in mutual funds, which platform is right for them, and which mutual fund should be invested in? In the second episode of this series, we tried to find out the answers to these questions. Avdhesh Garg, Founder & CEO, Confidence Investment spoke to us on all these issues.
How many types of mutual funds are there?
In response to this question, Avdhesh Garg said that mutual funds are mainly of two types. One is an equity mutual fund, and the other is a debt mutual fund. There are different types of risks associated with these two. And both work differently. If you want to get complete information about it, then you can watch this video here in full.
How much is the risk?
In an equity mutual fund, all your money is invested in the stock market. In which there is a risk of market fluctuations. Whereas in debt mutual funds, your money is invested in borrowing, which has the risk of interest rate. Increasing interest rates in debt mutual funds threaten to reduce your returns, while low interest rates are expected to increase returns.
What is Rule No. 72?
Through this rule, you can know how many years your money will double. For this, divide the return you are getting by 72. Garg told through an example that “Suppose you are getting a return of 12% in a year, then you will do 12/72, i.e., double the money in 6 years.” Along with this, keep in mind that the higher the compound annual growth rate, i.e., CAGR, the faster your money will double. “
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