How fast can you double your money? 6 cardinal rules of good investment - Thumb rules for your financial queries (2024)

FAQs

How fast can you double your money? 6 cardinal rules of good investment - Thumb rules for your financial queries? ›

Simply divide 72 by an expected annual rate of return. The result is how long it would take approximately for your money to double in value. For instance, if you expect an 8% annual return, it would take roughly 9 years (72 / 8 = 9).

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). Keep in mind that we're talking about annualized returns or long-term averages.

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.

So, if the interest rate is 6%, you would divide 72 by 6 to get 12. This means that the investment will take about 12 years to double with a 6% fixed annual interest rate. This calculator flips the 72 rule and shows what interest rate you would need to double your investment in a set number of years.

How can I double $5000 dollars? One way to potentially double $5,000 is by investing it in a 401(k) account, especially if your employer matches your contributions. For example, if you invest $5,000 and your employer offers to fully match at 100%, you could start with a total of $10,000 in your account.

Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

Buy a low-cost index fund that tracks the S&P 500; your $100,000 could grow to $1 million in about 23 years. You'll get there even faster by investing additional funds. Add $500 monthly and reach $1 million in just 19 years. Of course, past results don't guarantee future outcomes, but history is on investors' side.

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What is the 7 year rule in investing? ›

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.

The rule of 72 is only an approximation that is accurate for a range of interest rate (from 6% to 10%). Outside that range the error will vary from 2.4% to 14.0%. It turns out that for every three percentage points away from 8% the value 72 could be adjusted by 1.

As the name implies, the Rule of 42 is an investing strategy that calls for you to include at least 42 different equities and other assets in your portfolio. You can have more if you want, but you should have no less than 42 — and only a small amount of money invested in each.

What is the Rule of 72? Here's how it works: Divide 72 by your expected annual interest rate (as a percentage, not a decimal). The answer is roughly the number of years it will take for your money to double. For example, if your investment earns 4 percent a year, it would take about 72 / 4 = 18 years to double.

With $1 million invested, it may be possible to live off the interest from that portfolio. However, before deciding to do that, consider consulting with a financial planner who can help you develop the optimal plan for retirement income.

Applying the 8:4:3 rule means that your mutual fund investment will quadruple over 15 years and increase eightfold in 21 years. This approach highlights the potential of compounding over time, offering a clear path to substantial growth.

Investments, such as stocks, do not have a fixed rate of return, but the Rule of 72 still can give you an idea of the kind of return you would need to double your money in certain amount of time. For example, to double your money in six years, you would need a rate of return of 12%.

If you earn 7%, your money will double in a little over 10 years. You can also use the Rule of 72 to plug in interest rates from credit card debt, a car loan, home mortgage, or student loan to figure out how many years it'll take your money to double for someone else.