The Sun's Financial Diary

Personal experience of saving, investing, and living frugally.
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How Soon Can You Triple Your Money and How to Triple it?

(2007-04-10 13:14:11) 下一個

You are probably familiar with the Rule of 72, which tells you whenthe one dollar you invest today will be worth $2 once you have a rateof growth. If your annual rate of return is R%, then it will take you (72/R)years to double your money. For instance, for a 6% return (assuming therate is constant), you will need 72/6 = 12 years to see 100% gain ofyour money.

Now let’s think about doubling the gain instead of the principle.How long will it take for one dollar to become three? Again assumingthe rate of return is R%, the number of years for one dollar to become three is given by the following equation:

triple.png

The math is quite straightforward and can be done easily with Excel.But if you don’t want to do the “dirty” work yourself, then thefollowing plot is provided for your convenience so you can have an ideaon how long and how fast you should go . Note that the number of years to triple is smaller thanthe rate of return (without the percentage) once the return ratereaches R = 11, at which point, you only need ten and a half years to earn two dollars for every dollar invested.

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