Question

The average stock market return since 1926 has been 13%. According to the rule of 72, how often will an individual's investment double in that time?

Answer 1

Answer:

5.53 this is to 3 significant figures

Explanation:

If you put your money in the right places, it can grow substantially over time, thanks to the power of compound interest. It could even double, while you don’t have to do a thing.

Want to figure out just how fast your money could grow? The “Rule of 72” approximates how many years it will take for your money to double, given a fixed rate of return.

“Think about your savings for the future,” Tom Mathews and Steve Siebold write in their book “How Money Works,” which highlights the “Rule of 72” as of one of three essential personal finance topics to understand (the other two being compound interest and the time value of money). “The Rule of 72 can give you an idea of how many doubles you’ll get in your lifetime. With more time, a lower interest rate may give you enough to nail your goals. With less time, you may need a higher interest rate.”

The formula is simple: 72 / interest rate = years to double

Try plugging in various interest rates from the different accounts your money is in, from savings and money market accounts to index and mutual funds. For example, if your account earns:

1%, it will take 72 years for your money to double (72 / 1 = 72)

3%, it will take 24 years for your money to double (72 / 3 = 24)

6%, it will take 12 years for your money to double (72 / 6 = 12)

9%, it will take 8 years for your money to double (72 / 9 = 8)

12%, it will take 6 years for your money to double (72 / 12 = 6)