What Interest Rate Will Double Your Money in 5 Years? - Willowdale Equity (2024)

This article is part of our guide on how to invest 1 million dollars for income, available here.

New investors need to conceptually digest how compound interest works and the power of compounding growth before making their first investment. You don’t need to hit a home run on every investment, nor should you expect one, and if you’ve be advise that by someone, you need to exit stage left!

The truth is forecasting what your double-up timeline is for every investment dollar you put to work should be your focus. In this article, we’ll discuss what simple interest rate will double your money in 5 years and answer other questions about things like the rule of 72.

KeyTakeaways

  • If you wanted to double your money every 5 years, you would need to generate an annual rate of return of 14.4%.

  • How long it takes to double your money depends on various factors like economic cycles, the underline instrument’s certainty, operating and managing the investment’s performance, the industry, and many other variables.

What Interest Rate will Double Your Money in 5 Years?

If you wanted to double your money every 5 years, you would need to generate an annual rate of return of 14.4%.

(72 / 5 Years = 14.4% Annual Rate of Return)

Using the Rule of 72

The rule of 72 is a great formula to keep in mind when trying to understand how long it will take to double your money.

Here’s how you run the calculation:

That means that if you earned a 10% rate of return over 7.2 years, you would be able to double your money.

Who came up with the Rule of 72?

It is a rule that dates back to 1494 when Pacilio referenced it in his comprehensive math book “Summa Arithmetica”. Pacioli has given explanations for the reasons for which rules can be effective, Hence, some people think that the rules predate Pacioli’s novel.

Investing How Long to Double Money?

How long it takes to double your money depends on various factors like economic cycles, the underline instrument’s certainty, operating and managing the investment’s performance, the industry, and many other variables. For a more certain investment instrument like commercial real estate, a 5 to 7-year hold is a solid target timeline to double your money.

Next, let’s dive more into where you can generate these kinds of 5 to 7-year horizon return targets.

Good Read: Can live off the interest of 1 million dollars

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Where can you Generate these types of Returns?

These types of returns can be generated across many investment instruments, some with low risk, some with moderate risk, and some with high risk. As you can see, all of these investments are not created equal, and the certainty of preserving your principal investment while also growing that principle changes depending on that risk.

CRE (Commercial real estate) has some of the best risk-adjusted returns, especially when you compare it to the stock market since the year 2000. Did you know that, on average, investing $100,000 in the year 2000 would be worth around $560,000 in 2022? While the same $100,000 in stocks would be worth $320,000 in 2022!

Not to mention that CRE has significant tax advantages that allow you to further tax shelter your dividends, further enabling you to increase your overall returns and get you closer to that desired double-up.

With that being said, here are some of the safest risk-adjusted CRE assets that you can invest into:

  • Multifamily Real Estate: Is the most robust risk-adjusted asset class among CRE. These assets perform the best and have performed before, during, and after the COVID-19 pandemic. There continues to be a housing shortage, further driving up rents and keeping apartment vacancies at all-time lows, as the cost to build is just too expensive to make sense of for most builders.
  • Grocery-Anchored Retail Real Estate: Retail has weakened in many sectors of the economy due to the digitization of the economy and the rise in e-commerce. That being said, retail with large grocery stores as the “anchor tenant” to drive traffic to the plaza continues to perform well.
  • Industrial Real Estate: With the rise of e-commerce, industrial real estate has seen a greater demand to help with that increased need for production.

Frequently Asked Questions About What Interest Rate Would Double Your Money in 5 Years

It would take 12 years to double your money with an annual interest rate of 6%. You would calculate the following way (72/6= 12).

A good rate of return on investment over 5 years largely depends on the type of investment instrument and the risk associated with the initial investment. But as a general rule in real estate investing, a 100% ROI is a solid investment.

What Interest Rate Will Double Your Money in 5 Years - Conclusion

A 14.4% year-over-year interest rate on your cash over 5 years is challenging to achieve on a cash-on-cash basis. However, when including appreciation and asset growth into that equation, a double-up or 14.4% year over year over 5 years is definitely attainable. Achieving these kinds of returns allows you to increase your purchasing power for the second cycle of re-investing those dollars.

If you’re interested in getting access to private value-add multifamily investment opportunities across the southeastern united states, join the investors club here at Willowdale Equity.

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What Interest Rate Will Double Your Money in 5 Years? - Willowdale Equity (2024)

FAQs

What Interest Rate Will Double Your Money in 5 Years? - Willowdale Equity? ›

If you wanted to double your money every 5 years, you would need to generate an annual rate of return of 14.4%.

What is the rate of interest to double an investment in 5 years? ›

One can also use this to compute the returns a portfolio should generate to double money in a given time period. If you want to double it in five years, the portfolio should be invested such that it yields 72/5=14.4%.

How long will it take $1000 to double at 6% interest? ›

So, if the interest rate is 6%, you would divide 72 by 6 to get 12. This means that the investment will take about 12 years to double with a 6% fixed annual interest rate. This calculator flips the 72 rule and shows what interest rate you would need to double your investment in a set number of years.

How long will it take an investment to double at a 5% interest rate? ›

If the expected annual return on a CD is 5% and you invest the same amount, it will take you 14.4 years to double your money.

What is a good return on investment over 5 years? ›

General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation. However, a strong general ROI is something greater than 10%. Return on Stocks: On average, a ROI of 7% after inflation is often considered good, based on the historical returns of the market.

How long will it take to increase a $2200 investment to $10,000 if the interest rate is 6.5 percent? ›

It will take approximately 15.27 years to increase the $2,200 investment to $10,000 at an annual interest rate of 6.5%.

How to turn 100k into 1 million? ›

There are two approaches you could take. The first is increasing the amount you invest monthly. Bumping up your monthly contributions to $200 would put you over the $1 million mark. The other option would be to try to exceed a 7% annual return with your investments.

What is the best place to invest money right now? ›

11 best investments right now
  • High-yield savings accounts.
  • Certificates of deposit (CDs)
  • Bonds.
  • Money market funds.
  • Mutual funds.
  • Index Funds.
  • Exchange-traded funds.
  • Stocks.
Mar 19, 2024

What is a safe investment right now? ›

Safe assets such as U.S. Treasury securities, high-yield savings accounts, money market funds, and certain types of bonds and annuities offer a lower risk investment option for those prioritizing capital preservation and steady, albeit generally lower, returns.

How long will it take for you to get $100000.00 if you invest $5000.00 in an account giving you 9.7% interest compounded continuously? ›

t = ln(100,000/5,000)/0.097 ≈ 12.35 years Using the formula for continuous compounding interest, it will take approximately 12.35 years for a $5,000 investment to grow to $100,000 at an interest rate of 9.7% compounded continuously.

How much is $10000 for 5 years at 6 interest? ›

Summary: An investment of $10000 today invested at 6% for five years at simple interest will be $13,000.

How many years would it take money to grow from $5000 to $10000 if it could earn 6% interest? ›

Final answer:

It would take approximately 11.90 years for the money to grow from $5,000 to $10,000 with a 6% interest rate.

What is the Rule of 72 in mortgage? ›

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. Dividing 72 by the annual rate of return gives investors a rough estimate of how many years it will take for the initial investment to duplicate itself.

What is the Rule of 72 for retirement? ›

It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

What is the Rule of 72 in investing? ›

The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.

How long will it take $500 to double at a simple interest rate of 5? ›

Answer and Explanation:

The answer is 14.21 years. This is a future value (FV) problem that asks for the time necessary to double the PV of an initial investment of $500, given a simple annual interest rate of 5%. Using the variables provided, the problem is stated and solved algebraically, as illustrated below.

How many years does it take to double your money at 7% interest? ›

What Is the Rule of 72?
Annual Rate of ReturnYears to Double
6%12
7%10.3
8%9
9%8
6 more rows
Feb 14, 2024

How many years will it take an investment to double if it is invested at 5% compounded quarterly? ›

An investment earning 5% interest compounded quarterly will double every 13.9 years.

What ROI will double your money in 6 years? ›

You can also run it backwards: if you want to double your money in six years, just divide 6 into 72 to find that it will require an interest rate of about 12 percent.

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