Doubling money through the stock market is a very achievable goal. Over the long term, shares tend to generate attractive returns.
How long might it take to double my money with stocks? Let’s crunch the numbers.
Stock market returns
Stock market returns can vary wildly from year to year. However, over the long run, returns tend to come in at around 7%-10% a year, on average.
With that in mind, I’ve created the table below to show how long it might take to double my money at various rates of return within the aforementioned range.
|
Annual return |
Time needed to double my money |
|
7% |
10.2 years |
|
8% |
9.0 years |
|
9% |
8.0 years |
|
10% |
7.3 years |
It’s worth pointing out that a skilled investor can possibly achieve returns higher than this. The Fundsmith Equity fund, for example, has returned around 15% a year (before fees) since its inception in 2010. So here’s a look at the timeframes needed to double money at slightly higher rates of return.
|
Annual return |
Time needed to my double money |
|
11% |
6.6 years |
|
12% |
6.1 years |
|
13% |
5.7 years |
|
14% |
5.3 years |
|
15% |
5.0 years |
A short period
These tables illustrate that, when investors generate solid returns on their capital on a consistent basis, it really doesn’t take long to double their money.
We can see from the first table that if I was able to achieve a return of 9% a year on my money, I could potentially double it in just eight years.
Meanwhile, we can see from the second table that if I could earn 12% a year, I could potentially double my capital in just over six years.
That’s not a long time at all. For example, if I were to invest £200,000 today, and able to generate a return of 12% a year, I could be looking at capital of £400,000 by 2030. If I was to make additional investments on a regular basis, I could potentially get to £400k even sooner.
Achieving attractive returns
The thing is though, to achieve these kinds of returns from the stock market, investments need to be made properly.
That means owning a diversified investment portfolio containing at least 15 different stocks (ideally a few more). And these stocks need to be from different industries and areas of the market.
Simply holding a handful of well-known shares like BP and Lloyds is unlikely to generate the desired returns. That’s because individual stocks can sometimes underperform (both of these stocks have gone backwards over the last five years).
Instead, investors need to own a broad range of high-quality stocks including some listed internationally like iPhone maker Apple and Google owner Alphabet (the US market has delivered higher returns than the UK market in recent decades).
Of course, there’s still no guarantee returns will be attractive. The stock market can be volatile and unpredictable. However, owning a diversified portfolio of high-quality shares can dramatically improve the chances of generating strong returns.
The post Here’s how long it might take to double my money via the stock market appeared first on The Motley Fool UK.
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Ed Sheldon has positions in Alphabet, Apple and Fundsmith Equity. The Motley Fool UK has recommended Alphabet, Apple, and Lloyds Banking Group Plc. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2024
