The S&P 500 represents the 500 largest stocks traded in the U.S., and is commonly used as the benchmark for market performance. Historically, the S&P 500 has had strong growth, and compounds annually. But how long does it take the S&P 500 to double?
In general, the S&P 500 doubles every 7 years. Assuming the historical gains of ~10% annually, using the rule of 72, we can expect the S&P to double after around 7.2 years (72/10). This means that if you invest $10,000 today, you can expect it to reach $20,000 in just over 7 years.
Now it’s important to note that the doubling is not guaranteed, and will not follow a linear trajectory. That said, this demonstrates the magic of compounding, and the importance of time in the market.
How Often Does the S&P Double?
The S&P 500 will double in value after around 7 years. Since it’s inception in 1928, the S&P 500 has averaged around 10% annual return. Using the rule of 72, this means it will double after ~7 years.
It’s important to note though that this is on average, and will not always be the case. For example, if you had invested $1,000 in the S&P at it’s inception in 1926, your money would have doubled to $2,000 by 1928. But it would not double again to $4,000 until 1948.
Now this represents extenuating circumstances, catching the end of the roaring twenties, following by the great depression. But this is a good demonstration of the variability you could see. Let’s see how this double behaviour continued.
How Many Times has the S&P Doubled?
Starting from the inception of the S&P 500 in 1928, it’s value has doubled almost 14 times. If you had invested at the start of 1926, here is the first time your money would have reached every doubling point.
Note that I said the first time, as there were cases where the value doubled, the dropped again (see chart below).
| Doubling Count | Multiple of Initial Investment | First Year | Years Between Doubling |
| 0 | 1 | 1926 | N/A |
| 1 | 2 | 1928 | 2 |
| 2 | 4 | 1948 | 20 |
| 3 | 8 | 1952 | 4 |
| 4 | 16 | 1955 | 3 |
| 5 | 32 | 1961 | 6 |
| 6 | 64 | 1968 | 7 |
| 7 | 128 | 1980 | 12 |
| 8 | 256 | 1985 | 5 |
| 9 | 512 | 1989 | 4 |
| 10 | 1024 | 1995 | 6 |
| 11 | 2048 | 1998 | 3 |
| 12 | 4096 | 2013 | 15 |
| 13 | 8192 | 2019 | 6 |
As you can see, as much as 7 years to double can be taken as an approximation, the actual performance is variable. Historically, doubling has taken as little as 2 years, or as much as 20 years.
Years to Double by Interest Rate
As stated above, the rule of 72 is a handy approximation of the time it will take an investment to double based on the interest rate. Using this, we can estimate the time to double based on different interest rates. Similarly, if you wanted to find the interest rate you need to double in x years, you could divide 72 by that number. So if you wanted an investment to double in 2 years, you’d need 36% returns (72/2).
Here is the approximate years to double by interest rate:
| Interest Rate (%) | Years to Double (72 divided by interest rate) |
| 2 | 36 |
| 4 | 18 |
| 6 | 12 |
| 8 | 9 |
| 10 | 7.2 |
| 12 | 6 |
| 15 | 4.8 |
| 20 | 3.6 |
| 25 | 2.88 |
| 30 | 2.4 |
| 40 | 1.8 |
It’s important to note that this is an approximation, and as shown above with the S&P, the time to double is not consistent.
The Magic of Compounding
Now as much as the time to double can be misleading, it does highlight the magic of compounding.
Over the course of almost 100 years (1926 to 2019), the value of a dollar would have multiplied 8192x. This is a total return of 819,200%. That is a much bigger number than the 10% average, and shows the magic of coupounding given a long time frame.
When investing in the stock market, what matters is not timing the market, but rather time in the market. As you can see by this chart, just by staying in the market, your money will multiply. Note that the y-axis is logarithmic, and represents the multiple of the initial investment:
When you can leave your money to compound and build upon itself, the year-by-year gains become immense.
Why The Average Returns Can Be Misleading
It’s important to note that the figures provided above are approximations, and they can be misleading for two reasons: Returns aren’t average, and this assumes you don’t touch the money.
As much as 10% represents the average returns over the life of the S&P 500, the annual returns are hardly average. The S&P can return 40% one year, then lose 20% the year after (see here). Over the long term, the returns have been 10%, but this is over 10+ year time frames. If you look at the average 5 year returns, you can see there’s a lot more variability:
So depending on when you get into the market, you may see below average or above average returns over the first 5 years.
The second piece that can be misleading is that this assumes the money is completely untouched.
The magic of compounding is present when the base of capital is ever increasing. So every year you’re growing the initial deposit amount and the growth. But when you interrupt this by withdrawing money, you’re severely hampering your growth. The reality of life though, is that things arise that may force you to withdraw. Maybe you’ve got an emergency repair, or you use some money from your investments on a downpayment on your home. As much as we do our best to avoid withdrawing, sometimes we’re forced to.
Withdrawing for any reason will have outsized effects on your returns, and should be avoided whereever possible.
Summary
On average, the S&P 500 doubles every 7 years. This is assuming the historical returns of 10% annually continue, and the money is untouched.
It’s worth noting that though this can be used as an approximation, it should not be used as an expectation. The market flucuates year to year, and the returns aren’t linear. Keep this in mind when building your expectations on growth.
That said, the S&P 500 can be a great investment, and if you aren’t already you should take the steps to invest and build your wealth.