Markets in a Minute
Visualized: How Long Does it Take to Double Your Money?
Visualized: How Long Does it Take to Double Your Money?
At first glance, a 7% return on your investment may not seem that impressive. Yet what if you heard that your money could double in roughly 10 years?
The above graphic takes the rule of 72 shortcut and uses the more precise logarithmic formula to show how long it takes to grow your money at different annualized returns.
Why it Pays to Know the Math
Using the classic rule of 72, an investor can estimate how long it takes to double their money. At 7% annual returns, an investor would see $10,000 grow to $20,000 in about a decade by taking 72 and dividing it by 7%, the rate of return.
While the rule of 72 serves as a guide to estimating when your money will double, the more accurate way to arrive at this number is through a logarithmic equation.
In short, it divides the natural log of 2 by the natural log of 1 and adds this to the rate of return. We can see in the table below how leads to different results from the rule of 72:
| Rate of Return | Rule of 72 # of Years to Double Money | Logarithmic Formula # of Years to Double Money |
|---|---|---|
| 2% | 36.0 | 35.0 |
| 3% | 24.0 | 23.5 |
| 4% | 18.0 | 17.7 |
| 5% | 14.4 | 14.2 |
| 6% | 12.0 | 11.9 |
| 7% | 10.3 | 10.2 |
| 8% | 9.0 | 9.0 |
| 9% | 8.0 | 8.0 |
| 10% | 7.2 | 7.3 |
| 11% | 6.6 | 6.6 |
| 12% | 6.0 | 6.1 |
| 13% | 5.5 | 5.7 |
| 14% | 5.1 | 5.3 |
| 15% | 4.8 | 5.0 |
| 16% | 4.5 | 4.7 |
| 17% | 4.2 | 4.4 |
| 18% | 4.0 | 4.2 |
| 19% | 3.8 | 4.0 |
| 20% | 3.6 | 3.8 |
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.
If they were to put this money in a savings account, where the average savings rate is 0.6%, it would take 120 more years for their money to reach this potential.
In real terms, which takes inflation into account, an investor would see their money lose value if they parked it in a savings account. Historically, inflation has averaged 3.3% over the last century.
Historical Asset Returns
Here’s how often different assets double, based on historical returns between 1928 and 2022:
| Asset | Average Annual Return 1928-2022 | # of Years to Double Money | End Value of $100 Invested 1928-2022 |
|---|---|---|---|
| 3-Month T Bill | +3.32% | 21.22 | $2,140.51 |
| Real Estate | +4.42% | 16.03 | $5,121.52 |
| U.S. T Bond | +4.87% | 14.58 | $7,006.75 |
| Gold | +6.48% | 11.04 | $8,866.76 |
| Corporate Bonds* | +6.96% | 10.30 | $46,379.53 |
| S&P 500** | +11.51% | 6.36 | $624,534.55 |
Source: NYU Stern. *Represents Baa corporate bonds, which are considered investment grade. **Includes reinvested dividends.
We can see that 3-month T-Bills, often considered among the safest assets, doubled about every 21 years. Often, investors consider this a place to put cash that is low-risk and highly liquid.
Interestingly, real estate assets had returns of 4.4%, doubling roughly every 16 years. Between 1928 and 2022, the value of $100 invested in real estate assets would be worth $5,121.52. By contrast, the value of $100 invested in the S&P 500, including reinvested dividends, would have reached over $624,000.
Data from NYU Stern shows that the S&P 500 has doubled about 10 times since 1949—through recessions and bull markets—illustrating the power of investing over the long run.
Markets in a Minute
The Top 5 Reasons Clients Fire a Financial Advisor
Firing an advisor is often driven by more than cost and performance factors. Here are the top reasons clients ‘break up’ with their advisors.
The Top 5 Reasons Clients Fire a Financial Advisor
What drives investors to fire a financial advisor?
From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for firing a financial advisor stem from emotional factors, and go beyond purely financial motivations.
We partnered with Morningstar to show the top reasons clients fire an advisor to provide insight on what’s driving investor behavior.
What Drives Firing Decisions?
Here are the top reasons clients terminated their advisor, based on a survey of 184 respondents:
| Reason for Firing | % of Respondents Citing This Reason | Type of Motivation |
|---|---|---|
| Quality of financial advice and services | 32% | Emotion-based reason |
| Quality of relationship | 21% | Emotion-based reason |
| Cost of services | 17% | Financial-based reason |
| Return performance | 11% | Financial-based reason |
| Comfort handling financial issues on their own | 10% | Emotion-based reason |
Numbers may not total 100 due to rounding. Respondents could select more than one answer.
Numbers may not total 100 due to rounding. Respondents could select more than one answer.
While firing an advisor is rare, many of the primary drivers behind firing decisions are also emotionally driven.
Often, advisors were fired due to the quality of the relationship. In many cases, this was due to an advisor not dedicating enough time to fully grasp their personal financial goals. Additionally, wealthier, and more financially literate clients are more likely to fire their advisors—highlighting the importance of understanding the client.
Key Takeaways
Given these driving factors, here are five ways that advisors can build a lasting relationship through recognizing their clients’ emotional needs:
- Understand your clients’ deeper goals
- Reach out proactively
- Act as a financial coach
- Keep clients updated
- Conduct goal-setting exercises on a regular basis
By communicating their value and setting expectations early, advisors can help prevent setbacks in their practice by adeptly recognizing the emotional motivators of their clients.
Markets in a Minute
The Top 5 Reasons Clients Hire a Financial Advisor
Here are the most common drivers for hiring a financial advisor, revealing that investor motivations go beyond just financial factors.
The Top 5 Reasons Clients Hire a Financial Advisor
What drives investors to hire a financial advisor?
From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for hiring a financial advisor stem from emotional factors, and go beyond purely financial motivations.
We partnered with Morningstar to show the top reasons clients hire a financial advisor to provide insight on what’s driving investor behavior.
What Drives Hiring Decisions?
Here are the most common reasons for hiring an advisor, based on a survey of 312 respondents.
| Reason for Hiring | % of Respondents Citing This Reason | Type of Motivation |
|---|---|---|
| Specific goals or needs | 32% | Financial-based reason |
| Discomfort handling finances | 32% | Emotion-based reason |
| Behavioral coaching | 17% | Emotion-based reason |
| Recommended by family or friends | 12% | Emotion-based reason |
| Quality of relationship | 10% | Emotion-based reason |
Numbers may not total 100 due to rounding. Respondents could select more than one answer.
While financial factors played an important role in hiring decisions, emotional reasons made up the largest share of total responses.
This illustrates that clients place a high degree of importance on reaching specific goals or needs, and how an advisor communicates with them. Furthermore, clients seek out advisors for behavioral coaching to help them make informed decisions while staying the course.
Key Takeaways
With this in mind, here are five ways advisors can provide value to their clients and grow their practice:
- Address clients’ emotional needs early on
- Demonstrate how you can offer support
- Use ordinary language
- Provide education to help clients stay on track
- Acknowledge that these are issues we all face
By addressing emotional factors, advisors can more effectively help clients’ navigate intricate financial decisions and avoid common behavioral mistakes.
The Top 5 Reasons Clients Fire a Financial Advisor
The Top 5 Reasons Clients Hire a Financial Advisor
Visualizing the Growth of $100, by Asset Class
How Small Investments Make a Big Impact Over Time
What Were the Top Performing Investment Themes of 2023?
-
Infographics2 years agoThe Top Investment Quotes Every Investor Should Know
-
Markets in a Minute2 years agoMapped: The Growth in U.S. House Prices by State
-
Markets in a Minute2 years agoHow Closely Related Are Historical Mortgage Rates and Housing Prices?
-
Infographics2 years agoA Visual Guide to Stagflation, Inflation, and Deflation
-
Markets in a Minute1 year agoMapped: Global Energy Prices, by Country in 2022
-
Markets in a Minute2 years agoVisualizing Historical Oil Prices (1968-2022)
-
Infographics1 year agoVisual Guide: The Three Types of Economic Indicators
-
Markets in a Minute2 years agoMapped: Global Macroeconomic Risk, by Country in 2022
