The Rule of 72 and Various Rate of Returns

The following table demonstrates the rule of 72, which gives a good guide to how long it would take for your investments to double in value.

The starting investment value in this example is $10,000 in January 2009. As can be seen below, the rate of return on investments significantly affects performance over a long term period of, say, 15 years.


The Australian stock market has managed to achieve an average rate of return of 13.9% over the last 30 years (with dividends reinvested). If you can achieve the same rate of return over over 15 years, you could have turn $10,000 into nearly $80,000 as your investment value would double every 5.2 years (72/13.9 = 5.2) at this rate.

However, many professional traders out there can probably earn about 20% or more consistently over the long term (without gearing). So, if you could achieve this rate of return, you could have turn $10,000 into more than $160,000 in about 15 years because your investment would double every 3.6 years (72/20 = 3.6).

I have tested multiple stock market trading strategies combined with gearing, and have been able to achieve an average return of 38% over a 20 year testing period. This would mean my investment (or trading account) would double every 1.9 years (72/38 = 1.9) if I could achieve this rate of return consistently, which I believe is possible. So, $10,000 could have turn into $2.56 million in just 15 years.

All this is possible due to the powers of compounding interest and gearing.

What is gearing? It's simply borrowing money to invest or trade, and it can be achieved through Margin Lending or Contracts for Difference (CFD), which are readily available to traders in Australia.