The Martens Report - Turn $1 into $1 Million
It is true... I know the secret to turning a $1 investment into $1 million... And I will share it with you in this issue of the Martens Report. All you need to do is double your money, every year for 20 years and never touch it. Easy, right? Unfortunately, doubling your money every year is not something anyone (including myself) has successfully figured out.
So stepping back to reality, there still is an important lesson to be learned from this exercise, and it is the importance of compounding your returns and how this can benefit your investment over time. Compounding occurs when you leave any interest or growth you have earned on your investment, to stay invested, so it will also continue to earn interest or growth.
As you can see by the chart, every year the investment made 100%, however, in the early years it might not seem like you are earning much ($1 growing to $2... Yawn!) but as the account grows, your investment compounds and growth starts to accelerate. In year 20 you go from $524,288 to $1,048,576... Not bad, eh? So how long will it take my money to double? There is a fun rule of thumb that can give you a general idea of how long it will take for an investment to double. It's called the "Rule of 72."
Here’s how it works. You take 72, and divide it by your annual rate of return. For example, if you earned 10% per year, you would calculate 72 ÷ 10 = 7.2. Therefore in 7.2 years your initial investment would double if you earned 10% each and every year. I’ve included the chart below for quick reference, but you can also play with the Fidelity Growth Calculator to see what the potential is for your own portfolio.
And know we are always here if you have any questions. Thank you, Peter and Andrew