Ways to Double Your Money: The Rule of 72

What’s the easiest way to double your money?

You probably know the joke: The easiest way to double your money is by folding your bills in half! Of course, actually doubling your money takes a bit more strategy than that, but there’s an easy way to estimate how long it might take. We’ll talk about the Rule of 72, how to use it to estimate when you’ll double your money, and the best use cases for the technique depending on the amount of money you want to invest and your desired timeline.  

What is the Rule of 72?

The Rule of 72 serves as an estimation for when you will double your money. To use it, you divide 72 by the rate of return to determine how many years doubling your money will take. The most accurate results for this estimation stem from an 8 percent interest rate (which should take about 9 years) but you can still get a good, albeit less accurate, idea by using it with other percentages. 

How can you use the Rule of 72 to evaluate ways to double your money?

It can be hard to picture what returns look like, or what doubling your money will take with different asset classes. Keeping in mind that percentages on either side of 8% will be less accurate, let’s use the general guidelines of the Rule of 72 to evaluate some options.

REITs

If you’re thinking about investing in real estate, you might decide to go with a trust that aggregates multiple properties, or you might choose to invest in a single property at a time. Real estate investment trusts (REITs) have seen a 12.7% annual return on average over the past 20 years. Investors should expect to double their money in less than 6 years. 

Stocks

Investing in the stock market can be beneficial due to the low point of entry stocks provide for many investors. Stocks are also less intimidating for people who are tentative about buying and holding a given investment. While the past few years have seen average returns of 13.8%, long-term returns are lower at 6.33%. This means you can expect to double your money in about 11.5 years. 

Bonds

Bonds, while less volatile, tend to have lower returns on average, with about a 5.3% annual return. It will take almost 14 years to double your money by only using this investing strategy. 

High-Yield Savings

While the average savings account only earns about 0.33% annually, high-yield savings accounts can drive virtually risk-free returns at much higher rates. In 2023, many of these accounts saw rates well over 4%, with some of the highest bringing in average returns of 5.25% annually. If we use these best-case scenarios, someone can double their money with a high-yield savings account in 14-18 years. 

Real Estate Investing 

Investream’s returns on multifamily and other real estate investments, taking cash on cash returns and total gains in mind, average between 16-20% annually, meaning you can expect to double your money in 3.5 – 4.5 years on average. Investing in real estate can also help you hedge your bets against inflation and take advantage of unique tax benefits.  

You can also use the Rule of 72 in reverse. If you know you’d like to double your money in 6 years, for example, you’d need to find an investment that averages a 12% annual return. This estimate can also be used to determine how many additional years you will need to double your money if your investments come with percentage-based fees. 

Of course, there’s always a chance that you will lose money, but by understanding average returns in long-term investing, you can make better predictions and mitigate your investment risk.  

The most important way to double your money? Start investing in something today!

It’s easy to get analysis paralysis and fail to make any investment decisions, especially when you’re either just starting and the possibilities seem endless, or when you’re looking to make your first significant investment. 

Above all other advice, and beyond the Rule of 72, the most important thing to remember is that your returns will be better if you start today than if you start a month from now, a year from now, or potentially even a day from now. Slow and steady can win the race, but you can also modulate your timeline by investing along the spectrum of risk-free (high-yield savings accounts) to high-risk investments.  

The Rule of 72 is a great way to see the power that compounding brings to your money. Earning interest on your interest allows you to double your money that much faster. We hope after reading this short blog, you’ve got a better idea about what your money is doing for you. 

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