You have probably always heard of the number 100 being referred to as the ‘doubling’ number. This is because, historically, investors would often buy or sell securities (shares or other kinds of investments) at a 100% profit or loss. In other words, if they bought shares at $100 and then sold them at $200, they would have made a total profit of $200. This is why the number 100 is known as the ‘doubling’ number. For example, if you were to double your money, you would have twice the amount of money you started with (e.g., from $100 to $200).
But what exactly is the ‘doubling’ number? Let’s say you start with $100 and decide to put this money into a portfolio with some conservative investments (e.g., stocks). Over the course of a year, you make an annual return of 5%. So your portfolio would look like this:
$100 x 1.05 = $105
If you followed all of the rules and stayed in this investment for one year (365 days), you would have $105. This is the exact same principle that applies to the doubling number. What is important to note is that this rule does not apply to all types of investments. For example, your money could stay in a cash account and you could still make money through compounding. However, it is generally not a good idea to stay in a cash account for longer than a few months. This is because almost all of the growth that you made in the previous few months will be eaten up by inflation. In other words, you will not be able to keep on enjoying your profits if you do not keep at least some of your money in stocks or other long-term investments.
Based on the information discussed in this article, here are some important key takeaways: