Week 4 Day 2: Double at 7%, Double Again

Three doubles in 30 years. You put in $10,000 once. You do nothing else. At 7%, it becomes $80,000. The first double took 10 years. The second double added $20,000 in the next 10. The third added $40,000 in the final 10. Same rate, accelerating growth.

This is the core of why long-term investing works. Each doubling period adds more dollars than the last because the base keeps growing. Doubling from $10,000 to $20,000 adds $10,000. Doubling from $40,000 to $80,000 adds $40,000. Same percentage. Four times the dollars. Now imagine you are also contributing monthly during those 30 years. Each monthly contribution starts its own doubling clock. Your January contribution starts compounding. Your February contribution starts compounding. After a few years, you have hundreds of individual 'doubling clocks' all ticking simultaneously. This is why consistent investors wake up one day and their portfolio has grown more in a single year than they contributed in the last five. The clocks are all going off at once.

The 7% figure is commonly used as a reasonable estimate because it represents the long-term inflation-adjusted (real) return of the U.S. stock market. The nominal return has been closer to 10-11%, but after subtracting average inflation of 3%, the real purchasing-power growth is approximately 7%. Using real returns in your Rule of 72 calculations gives you a more honest picture because a dollar that 'doubles' to $2 in 10 years but faces 3% inflation annually has only doubled in nominal terms -- in purchasing power, it has grown roughly 34%. The Rule of 72 at 7% gives you the doubling time of your actual buying power, which is what matters for retirement planning.