Chart of the Day: 20 Year 7/10 Rule

Today’s Chart of the Day shows historical 20-year annual returns going back to 1947 compiled by Nicholas Colas with DataTrek. It shows that the Nominal Growth rate averaged 10.8%, and the Real Growth Rate (which is after inflation) is 7.1%.

According to the past, the 7-10 rule of thumb could be a viable assumption for a well-managed diversified stock portfolio. The 7-10 rule states it takes 7 years for money to double at 10%, and 10 years to double at 7%. So if you have $100,000 now and plan to live for another 30 years, the past indicates you could experience three “doubles” so your $100,000, would go to $200,000, then to $400,000, then to $800,000.