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2 min2019 APR 2
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If the best investments only get you 10-15% returns a year, how do people become rich from investing?



Satvik Beri, Data Scientist (2010-present)




I’m going to teach you a useful trick called the rule of 72.

Without a calculator, if you invest $100 for 40 years at a 10% interest rate, which of these is closer to how much money you’d end up with?

$500

$1,000

$5,000

$10,000

The answer is 3 – you’ll have made nearly 50x your investment (45.3x to be precise.) And furthermore, there’s an easy way to estimate this in your head: if you have an X% interest rate, then your investment will double approximately every 72/X years. So a 10% interest rate will double about every 7.2 years, while a 12% interest rate will double roughly every 6 years.

That means 40 years is 5–6 doublings at 10%, which gives you somewhere in between 32x and 64x your original investment. Not bad at all!

And that’s how people make money off of returns – a reasonable return, combined with a lot of time, is a pretty good vehicle for significantly increasing your wealth.