Do investments in S&P 500 really double every ~7 years? (2024)

FAQs

Do investments in S&P 500 really double every ~7 years? ›

We saw in the previous section that investing in the S&P 500 has historically allowed investors to double their money about every six or seven years. Your initial $1,000 investment will grow to $2,000 by year 7, $4,000 by year 14, and $6,000 by year 18.

According to his math, since 1949 S&P 500 investments have doubled ten times, or an average of about seven years each time. In some cases, like 1952 to 1955 or 1995 to 1998, the value of the investment doubled in only three years.

Based on the above, you would need to earn 10% per year to double your money in a little over seven years. The rule of 72 is "one of the simplest yet most powerful concepts in investment mathematics," says Brian McGraw, a senior wealth advisor at Hightower Wealth Advisors St. Louis.

Consider if an investor put their money in the S&P 500. Historically, it has averaged 11.5% returns between 1928 and 2022. In 6.4 years, their money would double, assuming these average returns.

However, our opinions are our own. See how we rate investing products to write unbiased product reviews. The S&P 500 has gained about 10.7% annually since its introduction in 1957. The S&P 500's annual average return in 2023 was 24%, so far it is 19% in 2024.

In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500 (^GSPC -1.73%), then you would be sitting on a cool $1.2 million today. That equates to a total return of 120,936%. The stock? None other than Gap (GPS -6.10%).

How the Rule of 72 Works. For example, the Rule of 72 states that $1 invested at an annual fixed interest rate of 10% would take 7.2 years ((72 ÷ 10) = 7.2) to grow to $2. In reality, a 10% investment will take 7.3 years to double (1.10^7.3 = 2). The Rule of 72 is reasonably accurate for low rates of return.

“By the time you hit 33 years old, you should have $100,000 saved somewhere,” he said, urging viewers that they can accomplish this goal. “Save 20 percent of your paycheck and let the market grow at 5% to 7% per year,” O'Leary said in the video. “You can get to $100,000.” Does the math check out?

Always sell a stock it if falls 7%-8% below what you paid for it. This basic principle helps you always cap your potential downside. If you're following rules for how to buy stocks and a stock you own drops 7% to 8% from what you paid for it, something is wrong.

1 At 10%, you could double your initial investment every seven years (72 divided by 10). In a less-risky investment such as bonds, which have averaged a return of about 5% to 6% over the same period, you could expect to double your money in about 12 years (72 divided by 6).

How much do you need to invest in S&P 500 to become a millionaire? ›

For example, if you are able to commit to investing $500 a month in an S&P 500 index fund like the Vanguard 500 Fund (NYSEMKT: VOO), you'll eventually have $1 million, and that includes paying the 0.03% expense ratio in the ETF, meaning you'll pay 3 cents each year for every $100 you have invested in the index fund.

As long as your time horizon is three to five years or longer, an S&P 500 index fund could be a good addition to your portfolio.

Yes, a 10% annual return is realistic. There are several investment vehicles that have historically generated 10% annual returns: stocks, REITs, real estate, peer-to-peer lending, and more.

S&P 500 10 Year Return (I:SP50010Y)

S&P 500 10 Year Return is at 181.9%, compared to 186.0% last month and 176.0% last year. This is higher than the long term average of 115.5%.

Basic Info. S&P 500 12 Month Total Return is at 27.14%, compared to 22.15% last month and 15.94% last year. This is higher than the long term average of 8.99%.

S&P 500 10 Year Return (I:SP50010Y)

S&P 500 10 Year Return is at 181.9%, compared to 186.0% last month and 176.0% last year. This is higher than the long term average of 115.5%.

One of those tools is known as the Rule 72. For example, let's say you have saved $50,000 and your 401(k) holdings historically has a rate of return of 8%. 72 divided by 8 equals 9 years until your investment is estimated to double to $100,000.

Returns in the S&P 500 over the coming decade are more likely to be in the 3%-6% range, as multiples and margins are unlikely to expand, leaving sales growth, buybacks, and dividends as the main drivers of appreciation.