Why Invest Forever? (Part 8)

Assuming a 7.2% annualized real return (including reinvested dividends), an investment will double in value about every 10 years following the rule of 72.
However, even with more modest assumptions significant wealth can be generated over time.

Why Invest Forever? (Part 7)

The rich continue to get richer, where the top 26 richest humans now control more wealth than the bottom 50%, based upon recent research from Oxfam.
Wealth has the capacity to grow exponentially after reaching a tipping-point, which can lead to a strong concentration of wealth among a small percentage of owners.
If you can’t beat ’em, join ’em.

Assuming a 7.2% annualized real return (including reinvested dividends), an investment will double in value about every 10 years following the rule of 72.
Given this rate of return, $1 can grow to $1000 after 100 years and $1 million after 200 years.
After enough gains in capital, incremental income can be consumed on a go-forward basis (practically indefinitely), without eroding the capital base (note: restrictions apply).

Investing in an passive fund, benchmarked to the S&P 500^®Index can lead to exponential growth over time.
Using the rule of 72, we show how investment capital can double about every ten years.
With a long enough timeline, this simple notion can lead to incredible wealth creation.

Although the worst-case outcomes for the investing in the S&P 500^®Index seem uninviting, the index has provided reasonable returns the vast majority of the time.
The worst-case 5-year holding period for the index produced an annualized real return of -13.233%; however, over 80% of the time the 5-year holding period produced a positive real (inflation-adjusted) return.
Further, the worst-case 45-year holding period for the index produced an annualized real return of only about 3.5%; however, 90% of the time the 45-year holding period produced a solid annualized real return of close to 5% or better.