In life, we may often hear that investing can bring us great returns, but truly understanding and mastering the mathematics behind investing can make us more comfortable with the destiny of our wealth. Today, let's demystify investing together and see how long it takes to double your money.
Using the classic rule of 72, investors can estimate how long it will take to double their money. Using an annual return of 7% as an example, an investor can divide 72 by 7% to get the approximate time it will take to double their money, which is about 10 years.
While the rule of 72 can serve as a guide for estimating the time it takes to double your bankroll, a more accurate way to calculate this number is through a number equation.
In short, it divides the natural logarithm of 2 by the natural logarithm of 1 and adds the result to the rate of return. As we can see from the ** below, this is different from the result of the rule of 72:
Consider if an investor puts money into the S&P 500 index. From 1928 to 2022, the S&P 500 returned an average of 115%。Assuming that such an average rate of return remains the same, then at 6Within 4 years, their funding will be doubled.
In comparison, if they put the money into a savings account, the average savings interest rate is 06%, then it will take another 120 years for the funds to reach this potential. In fact, if an investor puts their money into a savings account, their money will depreciate due to inflation. Over the past century, inflation has averaged 33%。
Historical return on assets
Next, let's see how often different assets have doubled based on historical returns from 1928 to 2022:
We can see that the 3-month Treasury bill, which is generally considered one of the safest assets, doubles roughly every 21 years. Many investors see this as a place where they can place low-risk and high-liquidity funds.
Interestingly, the return on real estate assets was 44%, roughly doubling every 16 years. Between 1928 and 2022, the value of a real estate asset invested in $100 will reach 5,121$52. In comparison, investing $100 in the S&P 500, including reinvested dividends, would reach more than $624,000 over the same period.
Data from NYU's Stern School of Business shows that the S&P 500 has doubled about 10-fold since 1949 — whether in a recession or a bull market — illustrates the power of long-term investing.
With this data, we can clearly see the returns of different investment vehicles and the time it takes to double the money. Therefore, understanding these mathematical laws can help us make more informed investment decisions and achieve our goal of wealth growth. **10,000 Fans Incentive Plan