Learn to Double your Money with Power of Compounding with Share Market Returns on Investment and Become Rich & Financially Free.
How long will it take you to double your money after you invest it in the market? Will it take 1 year, 5 years, maybe 10 years? In a world where many of us are endlessly trading our time for money, one of the truest ways to move towards financial freedom is to make your money work for you. To give you a better idea of this, it would help to understand
The Rule of 72.
For the most part, a majority of us earn our money and either leave it in our bank accounts or invest it in some way. The banks and the market provide varying interests on the money that we store away, and it might be tempting to do all kinds of complex math problems to
try and figure out when and how your money will double, but the simple way to approach this is by using The Rule of 72.
The Formula for The Rule for 72 looks like this 72/Rate of Return on your Investment = Years to Double So for example Let’s say you invest $5000 in the market and the annual rate of return on your investment is 7%, it would take you 10.3 years to double your investment. Try this out with a bunch of different interest rates to get the information you need. At 3%, it would take 24 years for your money to double. At 10%, it would take 7.2 years for your money to double and so on and so forth.
When you have this information, that is, the number of years it would take for your money to double, you can gain a sense of what interest rates and risks you’re willing to take. So if you kept your money in your run of the mill savings account, where it would earn, well, roughly 0.04% every year, it would take about 1800 years to double. I mean, if you got time, go for it. Then there are High Yield Saving Accounts, which give you a little more of a return at an average of .50%, which means 144 years for your money to double.
Bear in mind that this rate was roughly 2% at the start of the pandemic. Since the end of World War II, the S&P500 has been averaging around an annual return of 8% when adjusted for inflation. So, if you invest your money in the market, either through your 401K, Roth IRA or individual
brokerage account, you’ll see an average return of around 8% which will get your money to double in 9 years.
Ultimately The Rule of 72 gives you an idea of how many doubles you can achieve in your lifetime. Now the earlier you start investing, the lower the interest rate you would need in order to hit your goals. But just know, that if you haven’t started yet, it’s not a big deal. The best time to get going is always right now. The point of this whole thing to understand how compounding can work in your favor. Your money can double several times over in your lifetime on top of itself and put you in a really great place financially. Albert Einstein has even famously said “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”\
Obviously your rates of return can fluctuate year by year, but this rule gives you a good estimate to picture how your money is working for you and how compounding can dramatically affect your net worth. If you’d like to see more videos like this, leave me a comment with the number 72 and drop a like on this video. You can also subscribe with your notifications turned on for more weekly videos just like this.
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See you next time.