Mark to market: How to double your investment

Mark answers a question about how long it takes to double an investment in different asset classes over different time periods.

Co-Author | Morningstar

Question:

Dear Mark,

Very interesting article on lessons from the rule of 72.

I would be very interested to see the same tables over 20 years and 10 years.

Answer:

For readers, this question is referring to this article on the rule of 72.

Thank you so much for reading the article. I’ve included the 20- and 10-year charts below. Largely this is the same story and again reinforces the need for growth assets for long-term investors.

One thing that jumps out is the Australian bond and cash returns over the last decade. Both had a negative real return. This was a unique time for markets. Interest rates were very low going into COVID. Then they got even lower. Interest rates have rebound since the return of inflation but in this environment bonds perform poorly as their prices move inversely to interest rates.

Over the long-term real returns on cash and bonds are positive but still not high enough to generate wealth. The data from Vanguard on the Australian market illustrates this. There is also data from NYU that looks at real returns in the US between 1928 and 2023. Cash generated a 0.30% real return. Bonds clocked in at 1.60%. In that context neither is a safe place for investors to stash their savings.

My advice is to look at these charts while thinking about one of my favourite Charlie Munger quotes. I’m paraphrasing here but Munger stresses the importance of allocating capital by reminding investors that the highest and best use of capital is measured by the next best use. This opportunity cost view reminds me where my money should go as a long-term investor.

10 year nominal returns