$200/month at 10% = $1.3M in 40 years.
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How long does it take for your money to double?
At a 10% annual return, your initial investment of $1,000 will double to $2,000 in roughly 7.2 years without any additional contributions.
Compound interest is the interest on savings calculated on both the initial principal and the accumulated interest from previous periods. It allows your wealth to grow exponentially over time.
The Rule of 72 is a simple formula to estimate how long it will take for an investment to double. You divide 72 by the annual rate of return. For example, at a 10% return, your money doubles in about 7.2 years.
Time is the most crucial factor in compound interest. Because your money grows exponentially, starting to invest in your 20s instead of your 30s can double your final retirement balance, even if you invest less money overall.
Interest can compound daily, monthly, or annually. The more frequently it compounds, the faster your money grows. Most investment returns are typically calculated on an annual compounding basis for simplicity.
Historically, the stock market (like the S&P 500) has returned an average of around 10% per year before inflation. A conservative portfolio might return 5-7%, while high-yield savings accounts typically offer 4-5%.