72 has an amazing mathematical property - it helps us determine how many years it takes for our Money to double given a specific Growth Rate Percentage (CAGR - Compound Average Growth Rate).

- If your Money grows at 10% a year then it will take 7 years to double.
- If your Money grows at 5% a year it will take 14 years to double.
- If your Money grows at 7% a year it will take 10 years to double.
- If your Money grows at 3% a year it will take 24 years to double (this is probably a sensible growth rate for Cash in the bank - gulp).

Can you see a pattern?

You can use it the other way as well -

*“What growth rate do I need to double my cash in 4 years?”*Answer - 72 divided by 4 is roughly 18%.

The drawback is that it tends to fail on low numbers of years and large growth rates - i.e. if your cash grew at 30% a year, 72 suggests it would take 2 and a bit years - in practice it would be slightly different.

**How is this useful?**

It helps us get realistic expectations about what we can achieve.

Roughly speaking, the long term growth rate of the FTSE100 is about 7% a year (I think this excludes dividends). So, if we just track the FTSE100, then we can expect our Money to double in about 10 years.

So, a realistic, but conservative, growth rate for our portfolios is about 10% - this means we are just beating the FTSE100 - this must be possible on a Long Term basis but will require effort. At 10% a year, our money will double in 7 years.

If we are a bit better than this - maybe by using a bit of gearing with Spreadbets or just by being a bit sharper than the average tool - we might be able to hit 12% over the Long Term - this would double our dosh every 6 years.

OK, let’s say we are really flippin’ good at this and can hit 15% a year - although this is unlikely as we are getting to near Warren Buffett levels of gains. In this case, we would double our money every 4 and a half years ish.

Now, for real ultimate dreaming - let’s just do the maths on 20% a year -

**THIS WILL NOT HAPPEN**, so pointless really - but I suspect that Robbie Burns does achieve this - your money would double in 3 and a half years……

This is a key element of how we should be planning our Investments and Lifestyle / Retirement plans and Expected CAGR is arguably one of the first concepts we need to nail down. If you aim for 10% then you are about bang on the mark - anything higher than this is probably unrealistic - especially if you have Full Time work commitments and other drags on your time - if you aim for much higher, you will simply be taking on too much risk. I look for about 10% to 15% on my portfolio but I use Spreadbetting for leverage and I do not have a ‘proper job‘.

I knew you would like it !!