How to double (or triple) your income by investing in yourself

Armed with these strategies, you can double — or even triple — your money.

Want to double your money? There’s no shortage of suggestions for how to do that out there. Some will urge you to gamble, invest with borrowed money, chase high-flying stocks, try to time the market, or speculate in commodities and futures. Others will suggest the lottery or penny stocks or other ways that are so risky you’ll likely lose money.

If you really want to double your money, though, and do it with your precious, hard-earned dollars, it’s best to stick with unassailable methods.

How to double (or triple) your income by investing in yourself

Image source: Getty Images.

The Rule of 72

It’s hard to argue with math, and there’s a simple mathematical trick that can help you figure out how long it will take to double your money — the Rule of 72. Per the rule, if you divide 72 by an annual growth (or interest) rate, you’ll get the number of years it will take to double your money.

If you expect a 10% annual return, for instance, divide 72 by 10 and you’ll see that it’ll take about 7.2 years to double your money. The rule works well, except when you’re dealing with extreme numbers. An expected 72% growth rate might suggest doubling in a single year, but that would take a 100% growth rate. Check out the table below, to see the rule in action.

Years to Double

Data source: Calculations by author.

Basically, though, doubling your money, or increasing it to any degree, depends on three simple factors:

  • How much money you invest
  • How long it has to grow
  • How rapidly it will grow

By using any or all of those levers, you can influence how your money grows. Let’s take a closer look at how you can adjust those levers:

No. 1: Save and invest more

It’s obvious, but of course, in general, the more you invest, the more you can amass. The table below shows the different sums you might amass over various periods by investing $5,000, $10,000, or $15,000 annually:

Growing at 8% for

$5,000 invested annually

$10,000 invested annually

$15,000 invested annually

Data source: Calculations by author.

Many of us can’t just sock away $15,000 or more each year, but you can still probably invest more than you’re currently investing, and you can aim to increase your annual contributions to various savings accounts from year to year.

If you want to get aggressive about it, which is smart for many of us, especially those who have started late or who want to try to retire early, find lots of ways to spend less and consider picking up a side gig to earn a little more — all to facilitate more investments.

How to double (or triple) your income by investing in yourself

Image source: Getty Images.

No. 2: Invest for a longer period

The same table, above, shows the incredible power of time. Doubling the number of years in which your money can grow is likely to more than double how much you amass, thanks to the magic of compounding.

If you’re not a spring chicken anymore, you may not have 25 or 35 years before retirement, but you can still amp up your savings by saving more each year — and/or boosting your growth rate.

No. 3: Earn a greater rate of return

The growth rate is the last lever you can tweak. You can’t simply produce a high growth rate, though. In general, risk and return are interrelated, with low-risk investments (savings accounts, government bonds) tending to offer low growth rates and high-risk propositions (junk bonds, lottery tickets) offering high (possible) rates.

Consider aiming for solid middle ground, by focusing much of your long-term money on stocks. Over long periods, stocks have handily outperformed bonds, and the stock market has averaged annual returns of close to 10% over long periods. You can hope to do better by carefully selecting a range of individual stocks, but that takes skill and knowledge and a rational temperament. For most of us, it’s hard to beat a simple low-fee broad-market index fund or two, such as one that tracks the S&P 500.

The table below shows what a difference the growth rate makes, for annual investments of $10,000:

How to double (or triple) your income by investing in yourself

Franchise Your Business

How to double (or triple) your income by investing in yourself

You’re reading Entrepreneur India, an international franchise of Entrepreneur Media.

Among the two main paths- making a living or earning real money, most of the people are interested in choosing the latter one. But, they end up making a living only because they are not aware of the things that will let them make real money.

It is the entrepreneurs who make every possible effort to increase their income. And the main thing that lets them realize their dream is their focus on their goal. There is no doubt that you would also be looking to increase your income; so, here we are mentioning some simple tips that will let you triple your income in just 6 months. Let’s start.

1. Learn to say “no”

Every opportunity is not good; so learn to say “no”. No doubt you are trying to make money but it does not mean that you should get excited when anyone is offering you the money. Before getting excited about the money you will get, examine thoroughly that what the person is expecting from you for that money. In the case you find his expectations outrageous, you should not be afraid to reject the offer. Also, you should be clear that when your answer would be “no” for an opportunity.

2. Don’t rely on fundraising

Every entrepreneur will be well aware of the role that fundraising plays in a business. But, when trying to triple your income fast, you should not rely totally on the fundraising. It is because of the reason that it consumes a lot of time. You need to decide your target audience from whom you will take the money and also need to make a proper plan for that. Thus, in that time you would not be able to focus on other tasks. Undoubtedly, fundraising is crucial but it should be done up to a limit.

3. Engage with your audience

Online marketing is much prevalent nowadays and getting more followers on each of the social media networks is the main aim of every business. No doubt that a large number of audience results in the brand’s popularity, but your main focus should be on retaining the existing followers rather than attracting the new ones when income is your main focus. So, what you need to do is engaging with your followers individually and ensuring satisfactory services to them.

4. Work in collaboration

When you start a new business then you don’t get the chance to engage with the big brands. At this time, you need to know about the upcoming brands who are just starting out as your business. Then you should work to make money in collaboration. But, the main question is how to attract these brands to collaborate with you. Don’t worry! Here are some simple steps:

– Work hard and be impressive. Put all your efforts to stand out.

– Know your strengths.

– Now, examine what the brands are looking for and tailor your pitch accordingly.

5. Keep an eye on your expenses

You will only be able to triple your income when you will start making profits and profits will only be made when you will evaluate and control your expenses. So, you need to keep an eye on your business expenses and cut out the unnecessary ones. The best way to control your expenses is setting up a budget.

6. Make smart hires

Most of the entrepreneurs look for the experts who have in-depth knowledge of the field. But, we would like you to think about hiring the newcomers who want to grow. Such employees will be happy to work in the way you want and will not deny working extra hours. When an employee will understand your needs and will work accordingly, then you will also feel comfortable in giving him the responsibilities. This will free up your time to focus on the other money strategies.

Though there are a number of ways that would let you increase your income, but you cannot focus on all of them at the same time. So, it would be better to choose the bests of those ways and keep your focus on them. And the above-given ways are the ones you can rely on for realizing your dream of tripling the income in just six months.

All those who are having a real estate business must watch this video if they are interested in making fast money. Also, the entrepreneurs from other industries would find it helpful.

This article is guided by Andrey Sokurec,a business owner at Homestead Road, A leading house buyer in Minneapolis, MN.

What Is the Rule of 72?

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.

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. The chart below compares the numbers given by the Rule of 72 and the actual number of years it takes an investment to double.

Rate of Return Rule of 72 Actual # of Years Difference (#) of Years
2% 36.0 35 1.0
3% 24.0 23.45 0.6
5% 14.4 14.21 0.2
7% 10.3 10.24 0.0
9% 8.0 8.04 0.0
12% 6.0 6.12 0.1
25% 2.9 3.11 0.2
50% 1.4 1.71 0.3
72% 1.0 1.28 0.3
100% 0.7 1 0.3

Notice that although it gives an estimate, the Rule of 72 is less precise as rates of return increase.

Rule Of 72

The Rule of 72 and Natural Logs

The Rule of 72 can estimate compounding periods using natural logarithms. In mathematics, the logarithm is the opposite concept of a power; for example, the opposite of 10³ is log base 10 of 1,000.

e is a famous irrational number similar to pi. The most important property of the number e is related to the slope of exponential and logarithm functions, and it’s first few digits are 2.718281828.

The natural logarithm is the amount of time needed to reach a certain level of growth with continuous compounding.

The time value of money (TVM) formula is the following:

To see how long it will take an investment to double, state the future value as 2 and the present value as 1.

Simplify, and you have the following:

To remove the exponent on the right-hand side of the equation, take the natural log of each side:

This equation can be simplified again because the natural log of (1 + interest rate) equals the interest rate as the rate gets continuously closer to zero. In other words, you are left with:

The natural log of 2 is equal to 0.693 and, after dividing both sides by the interest rate, you have:

By multiplying the numerator and denominator on the left-hand side by 100, you can express each as a percentage. This gives:

How to Adjust the Rule of 72 for Higher Accuracy

The Rule of 72 is more accurate if it is adjusted to more closely resemble the compound interest formula—which effectively transforms the Rule of 72 into the Rule of 69.3.

Many investors prefer to use the Rule of 69.3 rather than the Rule of 72. For maximum accuracy—particularly for continuous compounding interest rate instruments—use the Rule of 69.3.

The number 72 has many convenient factors including two, three, four, six, and nine. This convenience makes it easier to use the Rule of 72 for a close approximation of compounding periods.

How to Calculate the Rule of 72 Using Matlab

The calculation of the Rule of 72 in Matlab requires running a simple command of “years = 72/return,” where the variable “return” is the rate of return on investment and “years” is the result for the Rule of 72. The Rule of 72 is also used to determine how long it takes for money to halve in value for a given rate of inflation. For example, if the rate of inflation is 4%, a command “years = 72/inflation” where the variable inflation is defined as “inflation = 4” gives 18 years.

Original Air Date
March 10, 2016

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Is it possible for you to double, even triple your money in a few short years through investing in property?

The answer is YES!

And you only need two things!

Let me explain…

Two things that’ll help you double your money in a few short years

  1. You need to find incredible value

Value investing for property is no different to value investing in shares. You need to find an asset that is selling at a great price, for less than it is REALLY worth.

In the case of property you should look for two things, firstly its price should be lower than comparable properties in the same area.
Secondly the rental income you make from a property should be more than 10% of the property’s value each year.

  1. You need to use ‘Other People’s Money’

Let’s face it – nobody gets rich by only investing with their own money. Even Warren Buffett wouldn’t have made it very far if he didn’t get money from investors to reinvest through his company.

So, instead of putting R500,000 into a property you only put R50,000 into it and get the bank to lend you R450,000. That way you don’t need a fortune to start out with but you still get to make money from a much bigger asset than you can own by yourself.

So how does this work? How do you apply this in practice?

Well, it’s simple – and I’ll show you how I did it recently so you can do it too…

If you want to double your money – start with this
You need to go out and look for a property. The easiest way is to look somewhere close to where you live yourself.

I prefer one or two bedroom apartments because I know there’s large demand for affordable apartments like this from young couples in the area I live in.

In my case I found a two bedroom apartment which I could buy straight from the developer. The nice thing with that is there are no extra fees like you’d have with any other property.

So, I negotiated a price of R550,000 on the apartment with the developer a year ago. I put in R50,000 of my own money and the bank gave me the rest.

I put a tenant in for R5,200 a month, meaning I get 11.3% of the property’s value in rental payments each year.

My interest expense on the property is roughly R4,000 per month, with levies at R450 per month. So the property pays for itself and then some every month.

Here’s where the effect of ‘Other People’s Money’ gets massive:

You see, after a year now the developer is selling similar sized two bedroom apartments for R630,000 each. The one I bought is bigger in fact. It sports 2 bathrooms and 2 car ports. While the other ones, being sold today, have only one of each. So we could argue the price I can get for it is slightly more…

But let’s stick with R630,000.

If I sell this property today, paid back the bank what I owe them and pay the estate agent a commission of R20,000 it means I’d be left with R110,000 after putting in only R50,000.

That’s a profit of R60,000 – or 120% in a single year.

If the property’s price goes up at a slower pace than it did in the first year over the next year and it sells for R680,000 after two years it books me a profit of around R110,000 or a return of 220% in two years.

That’s the power of ‘Other People’s Money’!

And, while I’m waiting for the property to grow in value someone else is paying back the loan I’ve got with the bank.

If you’d like to know how to find deals like this, or maybe how to buy a property using ‘Other People’s Money’ even when the bank won’t give you a loan make sure you keep your eyes peeled. I’m working on a project to help prospective property investors like YOU to gain all this knowledge as fast as possible!

Because the fact is, anyone can find deals like this. Double their money in a year or even less. And you can do it with very little risk on your part…

What Is the Rule of 72?

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself.

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. The chart below compares the numbers given by the Rule of 72 and the actual number of years it takes an investment to double.

Rate of Return Rule of 72 Actual # of Years Difference (#) of Years
2% 36.0 35 1.0
3% 24.0 23.45 0.6
5% 14.4 14.21 0.2
7% 10.3 10.24 0.0
9% 8.0 8.04 0.0
12% 6.0 6.12 0.1
25% 2.9 3.11 0.2
50% 1.4 1.71 0.3
72% 1.0 1.28 0.3
100% 0.7 1 0.3

Notice that although it gives an estimate, the Rule of 72 is less precise as rates of return increase.

Rule Of 72

The Rule of 72 and Natural Logs

The Rule of 72 can estimate compounding periods using natural logarithms. In mathematics, the logarithm is the opposite concept of a power; for example, the opposite of 10³ is log base 10 of 1,000.

e is a famous irrational number similar to pi. The most important property of the number e is related to the slope of exponential and logarithm functions, and it’s first few digits are 2.718281828.

The natural logarithm is the amount of time needed to reach a certain level of growth with continuous compounding.

The time value of money (TVM) formula is the following:

To see how long it will take an investment to double, state the future value as 2 and the present value as 1.

Simplify, and you have the following:

To remove the exponent on the right-hand side of the equation, take the natural log of each side:

This equation can be simplified again because the natural log of (1 + interest rate) equals the interest rate as the rate gets continuously closer to zero. In other words, you are left with:

The natural log of 2 is equal to 0.693 and, after dividing both sides by the interest rate, you have:

By multiplying the numerator and denominator on the left-hand side by 100, you can express each as a percentage. This gives:

How to Adjust the Rule of 72 for Higher Accuracy

The Rule of 72 is more accurate if it is adjusted to more closely resemble the compound interest formula—which effectively transforms the Rule of 72 into the Rule of 69.3.

Many investors prefer to use the Rule of 69.3 rather than the Rule of 72. For maximum accuracy—particularly for continuous compounding interest rate instruments—use the Rule of 69.3.

The number 72 has many convenient factors including two, three, four, six, and nine. This convenience makes it easier to use the Rule of 72 for a close approximation of compounding periods.

How to Calculate the Rule of 72 Using Matlab

The calculation of the Rule of 72 in Matlab requires running a simple command of “years = 72/return,” where the variable “return” is the rate of return on investment and “years” is the result for the Rule of 72. The Rule of 72 is also used to determine how long it takes for money to halve in value for a given rate of inflation. For example, if the rate of inflation is 4%, a command “years = 72/inflation” where the variable inflation is defined as “inflation = 4” gives 18 years.

The secret ingredient in both tricks is time.

Wall Street loves to overcomplicate the process of investing.

Throw enough arcane financial terms at a soon-to-be-retiree, ask them to choose between “variable annuities” and “covered call options,” or artificially segment their investing strategies into growth, value, and income holdings and chances are you will confuse your client so thoroughly that they will happily hand over a 2% annual fee to manage their money just so they don’t have to think about it!

Here at The Motley Fool, though, we do our best to keep investing simple. Simple enough that anyone can understand it. Simple enough that anyone can do it. And in that spirit, today I’m going to tell you two simple investing tricks you can use to double your money.

Be forewarned, however: Both these tricks require you to exercise a bit of patience, and to stay the course.

How to double (or triple) your income by investing in yourself

Image source: Getty Images.

Double the money in your portfolio

Have you heard about the rule of 72?

It’s a very simple formula for figuring out how long it takes for the money in your stock portfolio (or checking account, or savings account) to double. Take the rate at which you expect your stocks to “go up” annually, or the interest rate you are earning on your bank account, and divide that number into 72. The result is roughly how many years it will take for your money to double, assuming it grows steadily at the given rate.

For example, over the past century or so, the stock market has tended to grow about 10% in value annually. Divide 10 into 72, and voila — you can expect a simple stock investment such as an S&P 500 ETF to double in value every 7.2 years. Conversely, if you’ve got all your money stashed in a bank checking account paying you 0.01% in interest, it’ll take you about 7,200 years to double your nest egg.

Hint: This is why here at The Motley Fool we really think you’re better off investing in stocks. You can buy a really big basket of ’em, and limit your risk through diversification, by investing in the SPDR S&P 500 ETF (NYSEMKT:SPY) .

Double the money in your dividend check

Do you prefer cash that’s available to use when you need it so that you don’t need to sell a stock to get ahold of it? Here’s another trick to double your usable money — the kind that arrives every quarter in the form of a dividend payment from stocks that you own.

Say you own a stock that pays about a 2% dividend yield today (which is average for this market). Say too that it is growing its profits steadily, and thus able to grow the size of the dividend it pays in tandem. Finally, say it keeps on growing that dividend consistently, year-in and year-out. There are plenty such stocks that do this, by the way. We call a certain segment of them dividend aristocrats, and they include such well-known names as aerospace and defense company General Dynamics (NYSE:GD) , retailer Target (NYSE:TGT) , and water heater manufacturer A.O. Smith (NYSE:AOS) .

If such a stock were priced at $100 a share, it would be paying you $2 in dividends a year per share in the form of four quarterly dividend payments of $0.50 each. If priced at $50 a share, it would be paying you $1 a year per share; if $200 a share, $4 a share.

Now, whatever the actual dollar value of the dividend payment today, how long do you think it would take for that dividend amount to double?

The answer to that question could involve a lot of math, and vary with the size of each year’s dividend increase, the rate at which earnings are growing, and even changes in the stock’s price. But rather than bore you with math, let’s look at some examples of how dividends have doubled in practice (with a little help from the data miners at S&P Global Market Intelligence).

Back in 2012, General Dynamics was paying its shareholders $2.04 per share in annual dividends. Today, it pays $4.08 per share — a clean double in just eight years. General Dynamics’ dividend yield is still just 2.2% — not much more than the market average. Yet it pays its shareholders twice as much money in dividends today as it did eight years ago. (Incidentally, General Dynamics’ stock price has also more than doubled in that time.)

Want another example? Okay. How about Target? From 2012 to today, Target’s annual dividend has grown from $1.10 a share to $2.58 a share — that’s just eight years to get more than a double.

And A.O. Smith? For dividend investors, this is the best story of all. As recently as 2016, A.O. Smith was paying its shareholders a modest $0.48-per-share annual dividend. Today, its dividend stands at $0.90. It’s yearly dividend nearly doubled in size . in just three short years!

Granted, not every stock will grow its dividend as fast as A.O. Smith has done — nor even as fast as General Dynamics or Target. But the dividend aristocrats list shows us that nearly five dozen companies have grown their dividends consistently over time, and given enough time, those dividends can and will double.

Turns out doubling your money in the stock market isn’t so much a matter of “tricks” as it’s really just a matter of “time.”

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Real Estate Marketing Strategies: How to Double or Triple Your Income in 2014

What would be the benefits to you of doubling or tripling your income in 2014?

How to double (or triple) your income by investing in yourselfWould you be able to work less hours?
How to double (or triple) your income by investing in yourselfWould you be able to spend more time with your self, your friends, and your family?
How to double (or triple) your income by investing in yourselfWould you be able to take those vacations you have been dreaming of?

You are probably thinking, “That all sounds fine, but I’m just trying to survive.” Or, “That all sounds fine, but you don’t know the inner blocks I have.” Or, “How can I believe that I can ever be successful again?”

Let me ask you a few questions.

Have you ever felt like you had one foot on the gas and one foot on the brake?

How does that feel? Does that feel stuck?

Have you ever felt that one part of you is “gung ho” about success and creates all these action steps for you to do each day, while another part of you is resisting, procrastinating and sometimes even rebelling at what you set out to do?

How often have you told yourself, “I know what I should be doing, but I’m just not doing it and I don’t know why?”

The reason you don’t know is that you don’t understand the power of your subconscious mind.

You need to realize that even though the conscious part of your mind is saying, “I want to double or triple income in 2014”, there are other parts of you that are hidden and they have counter intentions, also known as self-limiting beliefs.

Here are examples of some Self-Limiting Beliefs that are holding you back from success. If you resonate even a little bit, even one percent, with these just visualize a check mark next that belief.

  • I’m not good enough.
  • I don’t have what it takes to succeed.
  • I have to be hard on myself in order to succeed (if you have this belief, then you judge and criticize yourself and put yourself down for making any mistakes).

How many of these are you resonating with, even a little bit?

Here’s are other common beliefs:

  • Other people’s needs come before mine
  • I need others approval

If you have the belief that you need others approval, then you probably also have the belief that you need to please people. Along with that, you probably have the belief that other people’s needs are more important than yours. Is it overwhelming to realize that these beliefs are operating inside of you without your awareness?

To help you feel more relaxed, please realize these 3 things:

  1. The list you have was only a list of beliefs, not facts.
  2. Realize that beliefs can be changed, it doesn’t matter how many decades you’ve had a belief, you can change it in the present moment.
  3. Realize that you can easily get outside help to release and reprogram your self- limiting beliefs.

Nature of abhors a vacuum. Once you have released the self-limiting beliefs that you discovered, you need to put something in their place.

Here are examples of some empowered beliefs:

  • “I am more than good enough.”
  • “The only person’s approval I need is my own.”
  • “My needs are just as important as anyone else’s.”

In today’s market prospecting is very important. It’s interesting to note that even people who’ve overcome other self-limiting beliefs are often blocked from prospecting. In other words, they know who to call and what say, but they still can’t bring themselves to do it.

Want to venture a guess as to why they can’t? If you said self-limiting beliefs, you would be right.

Here are examples of self-limiting beliefs that could stop you from prospecting.

  • If I call people I’m bothering them.
  • If I call people I know be rejected.
  • I call people people think I’m pushy salesperson.

If in the process of growing up, you found that whenever you reached out you would be rejected or judged then you begin to hold back, and you may have even become somewhat withdrawn. In your subconscious mind, a belief was formed that “If I reach out, there will be negative consequences”

Here’s an empowered belief to shift your mindset:

“I have a valuable service to offer, and people are happy to hear from me”

Here is the new updated beliefs that will EMPOWER you to prospect easily and effortlessly:

  1. When I call people they are happy to hear from me.
  2. I attract ready willing able and fun clients.
  3. There is no such thing as rejection, it’s either a match or it’s not a match.

An important component to doubling or tripling your income in 2014, is getting clear about your real purpose. Develop a meaningful relationship with your clients by coming from a place of contribution. Remember, don’t turn people into dollar signs.

Always remember that you have a valuable service to offer. Once you realize that you actually are the supplier of valuable real estate expertise you will be eager to offer your services.

“Double your money, fast!” Do those words sound like the tagline of a get-rich-quick scam? Whether you want to evaluate offers like these or establish investment goals for your portfolio, there’s a quick-and-dirty method that will show you how long it really will take you to double your money. It’s called the Rule of 72, and it can be applied to any type of investment.

How the Rule Works

To use the Rule of 72, divide the number 72 by an investment’s expected annual return. The result is the number of years it will take, roughly, to double your money. For example, if the expected annual return of a bank Certificate of Deposit (CD) is 2.35% and you have $1,000 to invest, it will take 72/2.35 or 30.64 years for you to double your original investment to $2,000.

Depressing, right? CDs are great for safety and liquidity, but let’s look at a more uplifting example: stocks. It’s impossible to know in advance what will happen to stock prices. We know that past performance does not guarantee future returns. But by examining historical data, we can make an educated guess. According to Standard and Poor’s, the average annualized return of the S&P index, which later became the S&P 500, from 1926 to 2020 was 10%. 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 time 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. In any given year, stocks might return 25% or lose 30%. It’s over a long period of time that the returns will average out to 10%. The Rule of 72 doesn’t mean that you’ll definitely be able to take your money out of the stock market in 10 years. You might have actually doubled your money by then, but the market could be down and you might have to leave your money in for several more years until things turn around. If you must achieve a certain goal or be able to withdraw your money by a certain time, the Rule of 72 isn’t enough. You’ll have to plan carefully, choose your investments wisely, and keep an eye on your portfolio.

Achieving Your Investment Goals

A professional financial advisor may be your best bet for achieving specific investing goals, but the Rule of 72 can help you get started. If you know that you need to have a certain amount of money by a certain date, for example, for retirement or to pay for your newborn child’s college tuition, the Rule of 72 can give you a general idea of which asset classes you’ll need to invest in to achieve your goal.

First, you can use the Rule of 72 to determine how much college might cost in 18 years if tuition increases by an average of 4% per year. Divide 72 by 4% and you know that college costs are going to double every 18 years.

Right now you have $1,000 to invest and with an 18-year time horizon, you want to put it all in stocks. 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. Suddenly 18 years isn’t as long a time horizon as you thought, perhaps leading you to rethink your investment strategy.

The Bottom Line

While the Rule of 72 is a good investment guideline, it only provides a framework. If you’re looking for a more precise outcome, you’ll need to better understand an asset’s future value formula. The Rule of 72 also does not take into account the effect of investment fees, such as management fees and trading commissions, can have on your returns. Nor does it account for the losses you’ll incur from any taxes you have to pay on your investment gains.