Did Your Money Really Double Every 7 Years?

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bltn
Posts: 1890
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Re: Did Your Money Really Double Every 7 Years?

Post by bltn »

This thread has reinforced something that I realized after a dozen years of saving and investing in real estate and a side business early in my work life. If ones primary job keeps one very busy, and one doesn t have the time or inclination to participate in high involvement investments, one can do fine with investment in the stock market index.
Even in inflation adjusted dollars, an investment in an Index 500 fund will be worth 15 times as much as the initial investment after 35 years. With no particular effort in managing such an investment. All that s needed for success is the discipline to continue to save and invest.
Useful insight.
RJC
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Re: Did Your Money Really Double Every 7 Years?

Post by RJC »

Now I wonder if we should drastically reduce our contributions. Adding an extra 5k in Taxable each month barely makes a difference when I forecast for retirement (in 14 years, using 7% real returns).

Is this basically Coast FIRE?
Normchad
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Re: Did Your Money Really Double Every 7 Years?

Post by Normchad »

RJC wrote: Wed May 15, 2024 9:34 am Now I wonder if we should drastically reduce our contributions. Adding an extra 5k in Taxable each month barely makes a difference when I forecast for retirement (in 14 years, using 7% real returns).

Is this basically Coast FIRE?
It certainly could be. COASTing just means taking your foot off the gas, because your investments will get there if you just wait. Of course if you become accustomed to spending an extra 5K/month, that changes things on the expense side quite a bit.

Still worth considering though, for sure.

In hindsight, I should have taken my foot off the gas sooner too.
Last edited by Normchad on Wed May 15, 2024 9:41 am, edited 1 time in total.
Topic Author
oilrig
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Re: Did Your Money Really Double Every 7 Years?

Post by oilrig »

RJC wrote: Wed May 15, 2024 9:34 am Now I wonder if we should drastically reduce our contributions. Adding an extra 5k in Taxable each month barely makes a difference when I forecast for retirement (in 14 years, using 7% real returns).

Is this basically Coast FIRE?
Keep going! Never know what can happen. Its a crazy world out there :)
cshell2
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Re: Did Your Money Really Double Every 7 Years?

Post by cshell2 »

RJC wrote: Wed May 15, 2024 9:34 am Now I wonder if we should drastically reduce our contributions. Adding an extra 5k in Taxable each month barely makes a difference when I forecast for retirement (in 14 years, using 7% real returns).

Is this basically Coast FIRE?
Or we could go into another "lost decade" where returns are flat for an extended period. You just never know. Maybe just back off some?
goblue100
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Re: Did Your Money Really Double Every 7 Years?

Post by goblue100 »

I did not double my money every seven years. Many reasons why:
1. Early in my investing career I was too conservative and funds were more expensive. (1980's)
2. Did not index early in my career. Chased "hot funds" per Money and Smart Money magazines.
3. Went through the lost decade (2000 - 2010). Mostly stayed the course but sometimes jumped around with my asset allocation. The second statement was probably true for all my career until the last 15 years.
4. Became a die hard indexer through reading Scott Burns and then this website. However, since I was nearing retirement I intentionally have gone 60/30/10 since 2018.

I didn't get S&P returns, my guess is my long term return is more like 7%. Just enough to be really comfortable.
"Confusion has its cost" - Crosby, Stills and Nash
DEBTINATOR
Posts: 129
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Re: Did Your Money Really Double Every 7 Years?

Post by DEBTINATOR »

I think this is an unrealistic question to answer. Very few people have a life that mimics an investment chart.

I've only been tracking my money (well) since 2011, so almost 13 years. When I started it was negative 70k. Am I at negative $140k today or $280k I guess? No.

It went positive in Sep-Nov 2012. Doesn't make sense to double zero either.

Somewhere in the 2-3M range today...who knows CA real estate and realtor fees :)

So the real question is...do I trust it to be 4-6M in 7 years and should I not save another dime? Probably not. I'll keep saving until we're closer to a reasonable retirement age.

Some of this money is in 529s, which will have a different investment style than my 401(k). Some is home equity, etc. etc.
avalpert1
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Re: Did Your Money Really Double Every 7 Years?

Post by avalpert1 »

RJC wrote: Wed May 15, 2024 9:34 am Now I wonder if we should drastically reduce our contributions. Adding an extra 5k in Taxable each month barely makes a difference when I forecast for retirement (in 14 years, using 7% real returns).

Is this basically Coast FIRE?
If you are basing your choice off of an assumption of 7% annualized real returns you aren't coasting, you are taking on tremendous risk.
LCX2000
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Re: Did Your Money Really Double Every 7 Years?

Post by LCX2000 »

This thread prompted me to look at our accounts.
And interesting example: During the first week of 2019 we purchased SPY and SDY. We have not added more to either and to date the SPY investment is up 71.86% and the SDY is up 25.85% on the same number of shares (though price/share was different.)
jarjarM
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Re: Did Your Money Really Double Every 7 Years?

Post by jarjarM »

I being tracking networth for the last 17 years, it really ebbs and flows. There were the lost decade where new money contribution doesn't seem to make any difference at all. Then the last 12+ years where we got annual returns that significantly outsize our income. At some point, it's just #s and you'll have to live your life and not worry about doubling every 7 years 'cause it doesn't go on that parabolic line 10% nominal CAGR suggests.
heyyou
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Re: Did Your Money Really Double Every 7 Years?

Post by heyyou »

Thank you to poster avalpert for this:
-His $1m doubled to $2m is less than 3 years passing that mark in January of '99
-It passed that mark again on the way down in the 5th year of investing in fall of '01
-Seven years in, in May of '03 it had not doubled and was at ~$1.6m
-At about 8.5 years in it reached the doubling point of $2m (again)
-Of course 12 years in it once again reached that $2m mark, though this time it was (again) on the way down
-By the time you get to 14 years in it had one again pierced $2m, but at $2.1m it was way short of doubling a second time
-In year 20 it did reach that second doubling at pass $4m, but by the end of year 21 it was still well short of making it to $8m - at ~$5.3
-In year 24 it finally did pierce that third doubling, but now at the end of 28 years it is still well short of a fourth doubling at $12.5m
The above is why I use a variable poprtfolio spending plan (the RMD spending plan) of a rising percentage of each recent portfolio value (age-based RMD % + spending dividends and interest) . The variations have not been a problem since I can see next year's WD vary as the markets fluctuate this year. SS delayed to age 70 has added stability to my retirement spending.

To the OP, the best historical answer to what the stock market will do is "It will fluctuate" said by a financier in the 1920s, notably a decade before the Great Depression. The seeking of certainty about future returns is not as wise as just expecting to need to endure those future account fluctuations.
Glockenspiel
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Re: Did Your Money Really Double Every 7 Years?

Post by Glockenspiel »

Adding a data point, our net worth crossed $1 million in June 2020, and is currently $2.3 million, less than 4 years later.

This includes additional contributions as well as home equity. At this rate, we'll be at $5.3 million in 4 more years (unlikely).
unwitting_gulag
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Re: Did Your Money Really Double Every 7 Years?

Post by unwitting_gulag »

oilrig wrote: Tue May 14, 2024 12:38 pm
ResearchMed wrote: Tue May 14, 2024 12:30 pm
UpperNwGuy wrote: Tue May 14, 2024 10:25 am
...
There is no way to know because I've been putting new money into my portfolio every month, and I've also added some large amounts resulting from financial windfalls. ...
Almost all of us have holdings other than the "S&P 500". And most of us are either adding at least some money over time, if in the accumulation period, or perhaps removing some money, if in the "using the retirement money during retirement" period. ...
Yea I get it, maybe it was a dumb question lol. As I reach a million, I was just thinking a lot about my portfolio lately and the future doubles I have left. ...
The wording may have been ungainly, but it's not a dumb question at all. It highlights two important points:

1. Early in the accumulation stage, most of our gains are from additional contributions. The doubling period is quick, even if the market isn't exactly roaring ahead. But then later on, once the accumulation is substantial, the portfolio stagnates during a bear market, even if we keep aggressively saving. We become thralls of the market.

2. The S&P 500 has been the undisputed champ for a long time now. Investing in nearly anything else, would have been a net drag. Here's looking at you, ex-US! So, the more that an investor was concentrated in just the S&P 500, the faster the doubling period. Diversification has been a painful anti-free-lunch.
HappyPappy
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Re: Did Your Money Really Double Every 7 Years?

Post by HappyPappy »

Net worth in just our retirement accounts, which are most aggressively invested:
2014 $252,000
2024 $853,000 ($647,000 in 2014 dollars)


We've made regular contributions during those ten years, so it's really not useful to you.


Net worth including all assets and liabilities:
2014 $622,000
2024 $1,480,000 ($1,123,000 in 2014 dollars)

Mathematically, sure I guess if you kept your money invested long enough in investment that averaged 10% returns, then over a long enough period of time you'd see your money double every ten years or so. But there are a million variables, which is where risk management comes in, and then you have varying rates of return depending on your asset allocation.
doobiedoo
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Location: Southern CA

Re: Did Your Money Really Double Every 7 Years?

Post by doobiedoo »

oilrig wrote: Tue May 14, 2024 9:56 am Average annual S&P 500 returns since 1957 have been around 10%, which means in theory that money doubled every 7 years using the rule of 72.
..
did your money double every 7 years and you ended up with $20-30 million+ after not adding another dime?
My returns are pretty close to 10% annually.
The x-axis is time in years, e.g. D-20 is Dec 2020.
The y-axis is net worth but I've cropped out the actual dollar amounts.
Image

There are some footnotes.
A. This is my net worth so it includes my house and 1 rental property.
B. I dollar-cost-averaged in new money until Dec 2011. [I retired in Jan 2012.]
C. The steep slope increase in Dec2012-Dec2013 was due to new money from an inheritance.
D. No new money was added after Dec 2013. In fact, I started spending my taxable dividends and cap gain distributions.
E. The flat slope in Dec2013-Dec2015 was due to a lower than normal equity AA to reduce SORR.
F. In 2012 I started picking more individual stocks. My individual stocks went from 7% of net worth in 2012 to 58% in 2024.
CoAndy
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Re: Did Your Money Really Double Every 7 Years?

Post by CoAndy »

bltn wrote: Wed May 15, 2024 8:17 am This thread has reinforced something that I realized after a dozen years of saving and investing in real estate and a side business early in my work life. If ones primary job keeps one very busy, and one doesn t have the time or inclination to participate in high involvement investments, one can do fine with investment in the stock market index.
Even in inflation adjusted dollars, an investment in an Index 500 fund will be worth 15 times as much as the initial investment after 35 years. With no particular effort in managing such an investment. All that s needed for success is the discipline to continue to save and invest.
Useful insight.
Some of my coworkers who have no interest in or knowledge of investing are some of the best investors I have ever seen in my personal life as when they asked for my assistance, I put them either in Target Date Funds or a simple 3 fund portfolio and they have done very real as they do not trust themselves to tinker so their investments have been left alone to grow and grow. Those that like to tinker have fared far worse, including myself for a few years... :oops:
Gardener
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Re: Did Your Money Really Double Every 7 Years?

Post by Gardener »

Really glad Op asked this question.

I have always used the rule of 72 and thought that can’t be right can it? The amounts to me at least were too staggering. But when I look at my portfolio I see did indeed double about every 6 years largely due to me contributing heavily as well. So of course, some of it isn’t compounding.

As someone that’s trying to still aggressively accumulate, selfishly I sometimes wish the market would slow down a little bit! Seems like I’m paying a premium for VTSAX these days.
LuckyInLife
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Re: Did Your Money Really Double Every 7 Years?

Post by LuckyInLife »

This is interesting because I rolled over a 401k into an IRA in April 2017. It was $700k. 95% of it went into SPY and the other 5% has been in various individual stocks and QQQ. I have not touched it since I am not yet 59.5. Its value today is $1.5 million. That's just a little over doubling in 7 years.
Finridge
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Re: Did Your Money Really Double Every 7 Years?

Post by Finridge »

oilrig wrote: Tue May 14, 2024 9:56 am Average annual S&P 500 returns since 1957 have been around 10%, which means in theory that money doubled every 7 years using the rule of 72.

Im approaching the $1 million mark in my 30's, and I'm wondering if that money will really compound to $32 million in 35 years, assuming a 10% return (I know its not a guarantee), and assuming that money doubles every 7 years and I add nothing else to it. I know 10% returns are never guaranteed, I know theres inflation, and I know anything can happen from now until then, but Im just using 10% for the sake of this topic and from historical returns.

Im curious, for those who had a million or a similar amount in the S&P 500 20-30 years ago, did your money double every 7 years and you ended up with $20-30 million+ after not adding another dime?
According to Portfolio Visualizer, Vanguard 500 Index Admiral Mutual Fund (VFINX) returned a CAGR of 7.92% from its inception in January 2001 through April 2024. And adjusted for inflation, its CAGR is only 5.23%. And this is with all dividends being reinvested.

Over this time period, $10,000 invested at the inception of the fund became $38,156--that is in nominal dollars, not real dollars (i.e. not adjusted for inflation.)

Edit: For fun, I compared Vanguard Total Bond Market Index Investor Class (VBMFX). It's CAGR over the same time period was 3.34% without adjustment for inflation. Adjusted for inflation, it was a very measly 0.76%. This is with dividends being reinvested.
unwitting_gulag
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Re: Did Your Money Really Double Every 7 Years?

Post by unwitting_gulag »

Finridge wrote: Thu May 16, 2024 10:04 pm
oilrig wrote: Tue May 14, 2024 9:56 am Average annual S&P 500 returns since 1957 have been around 10%, which means in theory that money doubled every 7 years using the rule of 72. ...
According to Portfolio Visualizer, Vanguard 500 Index Admiral Mutual Fund (VFINX) returned a CAGR of 7.92% from its inception in January 2001 through April 2024. And adjusted for inflation, its CAGR is only 5.23%. And this is with all dividends being reinvested.

Over this time period, $10,000 invested at the inception of the fund became $38,156--that is in nominal dollars, not real dollars (i.e. not adjusted for inflation.)

Edit: For fun, I compared Vanguard Total Bond Market Index Investor Class (VBMFX). It's CAGR over the same time period was 3.34% without adjustment for inflation. Adjusted for inflation, it was a very measly 0.76%. This is with dividends being reinvested.
The 21st century has thus far not been immensely profitable. Cumulative gains are even more meager if we include ex-US equities. This may be because the second half of the 20th century witnessed such heady gains, not just in the US, but worldwide. That raised valuations towards century's end, setting up what might be termed multi-generational disappointment. We should note the drumbeat of "irrational exuberance", that would look askance at current valuations, and thus, at whatever progress we did manage to have, over the past 24 years.

A lot of us are celebrating what look like lucrative gains. But this is because of dollar-cost averaging through some very dark times, especially during the "lost decade". Patience was rewarded. But that should not be conflated with a wonderful growth since the year 2000... because it wasn't.
Ron Ronnerson
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Location: Bay Area

Re: Did Your Money Really Double Every 7 Years?

Post by Ron Ronnerson »

Our household income has ranged between 100k-$150k over the past 20 years. I'm a public-school teacher in the Bay Area and my spouse is a stay-at-home parent. We're both 49 years old.

Our net worth numbers:
2008: $25k
2010: $100k - took 2 years to quadruple
2012: $250k - took 2 years to more than double
2015: $500k - took 3 years to double
2019: $1m - took 4 years to double
2024: $1.96m - took 5 years to (almost) double

The future remains, as always, unknown.
JBTX
Posts: 11411
Joined: Wed Jul 26, 2017 12:46 pm

Re: Did Your Money Really Double Every 7 Years?

Post by JBTX »

Anything is possible but if you believe market valuations are relevant over the long term, and evidence suggests they are, the chances of 10% nominal returns over the next couple of decades would seem low

https://www.crestmontresearch.com/docs/ ... eturns.pdf

https://www.advisorperspectives.com/art ... -returns-1

We have a couple of retirement accounts that have probably averaged 10% over 20 plus years, in primarily US stocks. Other accounts are significantly less that include international and bonds.
Finridge
Posts: 1134
Joined: Mon May 16, 2011 7:27 pm

Re: Did Your Money Really Double Every 7 Years?

Post by Finridge »

unwitting_gulag wrote: Thu May 16, 2024 11:18 pm
Finridge wrote: Thu May 16, 2024 10:04 pm
oilrig wrote: Tue May 14, 2024 9:56 am Average annual S&P 500 returns since 1957 have been around 10%, which means in theory that money doubled every 7 years using the rule of 72. ...
According to Portfolio Visualizer, Vanguard 500 Index Admiral Mutual Fund (VFINX) returned a CAGR of 7.92% from its inception in January 2001 through April 2024. And adjusted for inflation, its CAGR is only 5.23%. And this is with all dividends being reinvested.

Over this time period, $10,000 invested at the inception of the fund became $38,156--that is in nominal dollars, not real dollars (i.e. not adjusted for inflation.)

Edit: For fun, I compared Vanguard Total Bond Market Index Investor Class (VBMFX). It's CAGR over the same time period was 3.34% without adjustment for inflation. Adjusted for inflation, it was a very measly 0.76%. This is with dividends being reinvested.
The 21st century has thus far not been immensely profitable. Cumulative gains are even more meager if we include ex-US equities. This may be because the second half of the 20th century witnessed such heady gains, not just in the US, but worldwide. That raised valuations towards century's end, setting up what might be termed multi-generational disappointment. We should note the drumbeat of "irrational exuberance", that would look askance at current valuations, and thus, at whatever progress we did manage to have, over the past 24 years.

A lot of us are celebrating what look like lucrative gains. But this is because of dollar-cost averaging through some very dark times, especially during the "lost decade". Patience was rewarded. But that should not be conflated with a wonderful growth since the year 2000... because it wasn't.

Regarding the second half of the 20th Century compared to the 21st Century to date. See this: https://www.gurufocus.com/economic_indi ... ndex-price

The S&P500 was started February 1957.
By December 2000 it was up only about 348%, as adjusted for inflation, compared to its February 1957 value.
But now it is up about 900%, as adjusted for inflation, compared to its February 1957 value.

So Jan, 2001 through today seen much bigger gains than 1957 through the end of the century on a real (adjusted for inflation) basis. The nominal (not adjusted for inflation) returns of 1957-2001 look a lot higher, but remember there were really high inflation rates for sustained periods of time.

The first 10 years of the 21st Century were bad, but the last 15 years have more than made up for it.

But look at the S&P500 in 1992 on an inflation adjusted basis it was equivalent to where it had been in 1965.

But yes for people who were dollar-cost averaging money into stocks during these dark times, by reinvesting dividends and adding funds from their day jobs, this provided handsome returns over the years.
Wannaretireearly
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Re: Did Your Money Really Double Every 7 Years?

Post by Wannaretireearly »

The magic seen at the higher numbers is fun.

$100k seems like chump change up/down after $3M. Just amazing to see changes from one month to another. Was at $2M five years ago.

Am in coast mode, but still maxing everything out.
At some point there will be an abrupt end.
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
Finridge
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Re: Did Your Money Really Double Every 7 Years?

Post by Finridge »

Ron Ronnerson wrote: Thu May 16, 2024 11:34 pm Our household income has ranged between 100k-$150k over the past 20 years. I'm a public-school teacher in the Bay Area and my spouse is a stay-at-home parent. We're both 49 years old.

Our net worth numbers:
2008: $25k
2010: $100k - took 2 years to quadruple
2012: $250k - took 2 years to more than double
2015: $500k - took 3 years to double
2019: $1m - took 4 years to double
2024: $1.96m - took 5 years to (almost) double

The future remains, as always, unknown.

This is really great! But I assume that you earned a lot of this the hard way, working hard on your job, and saving and investing a generous portion of your salary, correct? You deserve high praise for this.

But if this is what you are doing this is different from what the OP was asking about, since the OP is hoping on doubling money every 7 years just through capital gains and the reinvestment of dividends, of an existing portfolio, and "without adding another dime" (paraphrasing that last bit).
Finridge
Posts: 1134
Joined: Mon May 16, 2011 7:27 pm

Re: Did Your Money Really Double Every 7 Years?

Post by Finridge »

Wannaretireearly wrote: Fri May 17, 2024 12:31 am The magic seen at the higher numbers is fun.

$100k seems like chump change up/down after $3M. Just amazing to see changes from one month to another. Was at $2M five years ago.

Am in coast mode, but still maxing everything out.
At some point there will be an abrupt end.
At some point the money (what is left of it anyway) will still be there, but we wont' be. An abrupt end indeed!

I like this FIRE calculator because it puts everything in perspective. Unlike any other FIRE calculator I know of, it has a "death wedge" and you can see that dark wedge grow and grow over time until it dominates and then reaches the point of 100% inevitability. To paraphrase Emily Dickenson, we may not want to stop for Death, but Death will kindly stop for us.

https://engaging-data.com/will-money-last-retire-early/
Wannaretireearly
Posts: 5100
Joined: Wed Mar 31, 2010 4:39 pm

Re: Did Your Money Really Double Every 7 Years?

Post by Wannaretireearly »

Finridge wrote: Fri May 17, 2024 12:42 am
Wannaretireearly wrote: Fri May 17, 2024 12:31 am The magic seen at the higher numbers is fun.

$100k seems like chump change up/down after $3M. Just amazing to see changes from one month to another. Was at $2M five years ago.

Am in coast mode, but still maxing everything out.
At some point there will be an abrupt end.
At some point the money (what is left of it anyway) will still be there, but we wont' be. An abrupt end indeed!

I like this FIRE calculator because it puts everything in perspective. Unlike any other FIRE calculator I know of, it has a "death wedge" and you can see that dark wedge grow and grow over time until it dominates and then reaches the point of 100% inevitability. To paraphrase Emily Dickenson, we may not want to stop for Death, but Death will kindly stop for us.

https://engaging-data.com/will-money-last-retire-early/
64% success rate if I stop working now. Do I feel lucky?

I’ve not been able to figure out how to add two SS at different times, different amounts to the calculator.
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
Ron Ronnerson
Posts: 3596
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Did Your Money Really Double Every 7 Years?

Post by Ron Ronnerson »

Finridge wrote: Fri May 17, 2024 12:35 am
Ron Ronnerson wrote: Thu May 16, 2024 11:34 pm Our household income has ranged between 100k-$150k over the past 20 years. I'm a public-school teacher in the Bay Area and my spouse is a stay-at-home parent. We're both 49 years old.

Our net worth numbers:
2008: $25k
2010: $100k - took 2 years to quadruple
2012: $250k - took 2 years to more than double
2015: $500k - took 3 years to double
2019: $1m - took 4 years to double
2024: $1.96m - took 5 years to (almost) double

The future remains, as always, unknown.

This is really great! But I assume that you earned a lot of this the hard way, working hard on your job, and saving and investing a generous portion of your salary, correct? You deserve high praise for this.

But if this is what you are doing this is different from what the OP was asking about, since the OP is hoping on doubling money every 7 years just through capital gains and the reinvestment of dividends, of an existing portfolio, and "without adding another dime" (paraphrasing that last bit).
I get your point and it’s a good one. The answer to the question is yes, but to less and less a degree as time goes on. For example, our net worth increased by roughly $400k over the past year while our gross income last year was $140k, of which we spent a good chunk. So most of the increase in net worth was from appreciation of assets. This was definitely not the case years ago, when our net worth was much lower and we were just starting to invest.
abc132
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Re: Did Your Money Really Double Every 7 Years?

Post by abc132 »

There is a large crowd here that misrepresents stock risk.

They start at the peak of a bubble and show how long it takes to get back to that peak. That result is not anything like what you will get if you are an accumulator or if you experienced that bubble. It is some imaginary person who won $5 million in the lottery, experienced no run-up, and then had to wait a decade plus to get back to their original investment. It takes perfectly bad timing and a single lump sum of earnings to invest that poorly. They don't ever start with money perfectly lump-summed at the bottom in their analysis. The analysis is heavily biased without considering the true range of results. With no attempt to include accumulation the presentation of stock results are misleading at best.

2004-2009 my portfolio doubled
2009-2014 my portfolio doubled
2014-2019 my portfolio doubled
2019-2024 my portfolio doubled

This is what typically happens when you accumulate through downturns and maintain a good stock allocation without behavioral mistakes. Early downturns actually help the accumulator. Instead of misrepresenting the historical case we should be showing how well stocks have always done for the accumulator. We should look at SWR's only very near retirement and we should not accumulate based on SWR studies.

Do we manage fear by misrepresenting stock risk or do we manage fear by showing the plan has always worked? Stocks undoubtedly have the ability to go to zero but it doesn't matter for the accumulator - that stock risk is always worth taking until roughly half of our goal. We can't ensure the number of years working or savings rate that it would take to get to financial independence without stock risk.
secondcor521
Posts: 1688
Joined: Wed Sep 10, 2014 4:11 pm

Re: Did Your Money Really Double Every 7 Years?

Post by secondcor521 »

Wannaretireearly wrote: Fri May 17, 2024 12:56 am I’ve not been able to figure out how to add two SS at different times, different amounts to the calculator.
There's a way to do it with semicolons. See the instructions towards the bottom of the page.
DoctorE
Posts: 209
Joined: Thu Feb 13, 2014 2:11 am

Re: Did Your Money Really Double Every 7 Years?

Post by DoctorE »

abc132 wrote: Fri May 17, 2024 1:17 am There is a large crowd here that misrepresents stock risk.

They start at the peak of a bubble and show how long it takes to get back to that peak. That result is not anything like what you will get if you are an accumulator or if you experienced that bubble. It is some imaginary person who won $5 million in the lottery, experienced no run-up, and then had to wait a decade plus to get back to their original investment. It takes perfectly bad timing and a single lump sum of earnings to invest that poorly. They don't ever start with money perfectly lump-summed at the bottom in their analysis. The analysis is heavily biased without considering the true range of results. With no attempt to include accumulation the presentation of stock results are misleading at best.

2004-2009 my portfolio doubled
2009-2014 my portfolio doubled
2014-2019 my portfolio doubled
2019-2024 my portfolio doubled

This is what typically happens when you accumulate through downturns and maintain a good stock allocation without behavioral mistakes. Early downturns actually help the accumulator. Instead of misrepresenting the historical case we should be showing how well stocks have always done for the accumulator. We should look at SWR's only very near retirement and we should not accumulate based on SWR studies.

Do we manage fear by misrepresenting stock risk or do we manage fear by showing the plan has always worked? Stocks undoubtedly have the ability to go to zero but it doesn't matter for the accumulator - that stock risk is always worth taking until roughly half of our goal. We can't ensure the number of years working or savings rate that it would take to get to financial independence without stock risk.
Another thing the crowd does is anchor to peak wealth, especially when contributions stop. Recipe for regret. A better way would be to compare the contributions to just staying in T-bills to gauge if being in stocks was a 'good idea'.

Fun fact about the rule of 72 is that it is based on the compound geometric returns (CAGR) and not arithmetic averages. Compound returns take volatility into consideration. Compound returns for stocks are around -1.5% lower than the average returns. The +50% / -50% examples why average return is bad is also an extreme example too many take to heart. So many numbers get thrown around in the media either before/after inflation, with/without dividends and arithmetic vs geometric returns all mashed up...

US stocks since WWII have returned 12.82% average, 11.37% compounded... with dividends, before inflation. ~6.5Y on average to double nominally without contributions.
Valuethinker
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Re: Did Your Money Really Double Every 7 Years?

Post by Valuethinker »

Clever_Username wrote: Tue May 14, 2024 10:11 am First of all, a word of caution: look at real growth, not nominal growth. I believe the 10% figure you're quoting is nominal growth, meaning it does not account for inflation. If your wealth grows 10%, but inflation is 3%, you've really grown less than 10% (but still positive).

Also, growth is geometric; two years at 10% is different from a flat year and a year of 20%.

As for not contributing, I saw somewhere that contributions account for half of a typical nest egg, while growth is the other half. I haven't given it much thought to see if that makes sense, nor do I recall where I heard that, but I certainly wouldn't stop contributing just because of past performance, even if I thought future performance would be similar.

Just the same, congratulations on hitting the two comma club in your 30s. That's a combination of many things, including good choices and good discipline. I joined the club a few years ago, in my late 30s, and I am optimistic for my financial future from here. 30 months after joining the two comma club, my total hit $1.4M, although the past 30 months have not been historically typical in terms of performance.

As for me, I had a net-worth of about $0 fourteen years ago, and it has much more than doubled since then. :D Okay, I started my investing journey in 2012, that figure is a little misleading (hopefully you found it funny).
Good point re inflation.

One could check the CPI-U change in index since 30 or 40 years ago. But I suspect it was at least 3% and might have been more.

Actual long run returns, pre expenses, for US index have been about 6% real since 1900 (source: Dimson Marsh Staunton Credit Suisse (now UBS) review, published annually). And about 5% real for the Rest of the World. There's all kinds of reasons to think that the US stockmarket got "lucky" in the last 120 years.

For what it's worth, I think there's a pretty good case the long run return going forward will be 3-5% real, but a US investor would be entitled to pencil in 5% real return.

That's roughly doubling in real terms every 14 years. So 4x in 28 years.

Then you have taxation. Big drag on returns.

And volatility. If you happen to take this number in, say, 1966, and you do not invest further, then you don't look good by 1981. Or if it's 1929 of course.

It is absolutely worth contemplating that there are periods nearly 2 decades long where stock investors enjoyed very disappointing returns. The fact that things then "reverted towards the mean" doesn't mean:

1). that will happen in the future - in retrospect the 1980s and 1990s were a golden time for stock investors due to global economic and political changes - financial and other deregulation, end of the Cold War, rise of China as a manufacturing superpower (thus lowering inflation across the world) etc.

2). that it will ever happen. Because some stock markets just miserably underperformed in the 20th Century. I think Australia and maybe South Africa outperformed the USA? UK (the largest stockmarket at the beginning of the period) underperformed miserably. So just taking the US data feels like survivor bias.

TL;DR - Keep investing, but make your financial plans assuming 5% or less real return for equities. If you get halfway there, and things have been much better, then you can adjust your plan.
unwitting_gulag
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Re: Did Your Money Really Double Every 7 Years?

Post by unwitting_gulag »

DoctorE wrote: Fri May 17, 2024 6:48 am
abc132 wrote: Fri May 17, 2024 1:17 am There is a large crowd here that misrepresents stock risk.

They start at the peak of a bubble and show how long it takes to get back to that peak. That result is not anything like what you will get if you are an accumulator or if you experienced that bubble. It is some imaginary person who won $5 million in the lottery, experienced no run-up, and then had to wait a decade plus to get back to their original investment. ...
Another thing the crowd does is anchor to peak wealth, especially when contributions stop. Recipe for regret. ...
Guilty as charged. I'd even go further: if Asset A peaks on Tuesday, then drops... while Asset B was low on Tuesday, peaks on Thursday and then drops... then I will "anchor" to the sum of where A peaked and B peaked, as respective individuals. For example, at the moment I am anchored to the Russell 2000's peak of around 2400, in the spring of 2021. By this anchoring, US small-caps remain in a correction, even now... and are barely out of a bear market. Hence the various recent calls about market ascendancy, new highs and especially of froth, feel personally jarring and hurtful.
cbs2002
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Re: Did Your Money Really Double Every 7 Years?

Post by cbs2002 »

I just looked. From 2002, when I started keeping track, to 2020, the last time it happened, our investments not including real estate doubled 4 times. So that's every 4.5 years on average. That includes contributions of about 25% of our ending value in 2020, but I don't do the math to determine how much is from growth and how much is from contributions. If we double again by 2027 I won't be working at my current job :happy

According to portfoliovisualizer, VFIAX went up 4.7 times during that time period, or twice doubled plus a bit extra.
JS-Elcano
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Re: Did Your Money Really Double Every 7 Years?

Post by JS-Elcano »

With contributions included, my doublings to reach 1.5 million look like this:

-> 2x: Nov. 2020 (3.5 years)
-> 4x: June 2017 (7 years)
-> 8x: Nov. 2013 (10.5 years)
-> 16x: Dec 2008 (15.5 years)
-> 32x: Nov. 2006 (17.5 years)

So, doubling every 3.5 years.

No illusions about this continuing, also because my contributions are a much smaller percentage of my portfolio now than they were in the past.
ucibob1
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Re: Did Your Money Really Double Every 7 Years?

Post by ucibob1 »

Interesting topic, this has been our journey (includes yearly contributions/home equity)

NW - Time
500K - started tracking as of Dec 31, 2013
1M - 2 Years, 10 Months
2M - 3 Years, 6 Months
3M - 1 Year, 1 Month
4M- 1 Year, 7 Months
4.75M - Current - 1 Year, 4 Months
Wannaretireearly
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Re: Did Your Money Really Double Every 7 Years?

Post by Wannaretireearly »

secondcor521 wrote: Fri May 17, 2024 2:05 am
Wannaretireearly wrote: Fri May 17, 2024 12:56 am I’ve not been able to figure out how to add two SS at different times, different amounts to the calculator.
There's a way to do it with semicolons. See the instructions towards the bottom of the page.
Thanks!
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
Tundrama
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Re: Did Your Money Really Double Every 7 Years?

Post by Tundrama »

Yes. On average.

I have my hard copies of TSP since day one, beginning the Fall of 1990. Every couple of years, wife and I look through them for nostalgia sake. It’s really cool. When returns are lower, we look at the number of shares we own. We focus on share numbers during drought conditions. Makes us smile. We focus on returns, during the blitz’s. It’s all mental &#’ag.

I go all C fund (S & P) to the grave.

Who cares…I don’t.
HappyPappy
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Re: Did Your Money Really Double Every 7 Years?

Post by HappyPappy »

doobiedoo wrote: Thu May 16, 2024 5:49 pm F. In 2012 I started picking more individual stocks. My individual stocks went from 7% of net worth in 2012 to 58% in 2024.
You're not allowed to that.
HappyPappy
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Re: Did Your Money Really Double Every 7 Years?

Post by HappyPappy »

https://archive.nytimes.com/www.nytimes ... .html?_r=2

I'd love to see an updated version of this kind of chart. This chart shows that 20 year periods with average rates of return at 7% above inflation are actually by far the exception, starting at 1920 and ending at 2010.
sixty40
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Re: Did Your Money Really Double Every 7 Years?

Post by sixty40 »

On a real world situation, I have held VTSAX (VG Total Stock Mkt Fund) for over 14 yrs. I have a dividend reinvestment dated 3/24/2010 for 16.769 shares with a share price of $28.97/sh. $28.97/sh x 2 x 2 = $115.88/sh, current VTSAX (5/29/2024) price is $127.64. So money doubled investing in VTSAX every 7 yrs over this 14yr period w/o reinvesting dividends.
From research VFINX (VF SP500 fund) with an "adjusted close price" of $13.75/sh on 12/31/1988 (35 yrs from 12/31/23). $13.75 x 2 x 2 x 2 x 2 x 2 = $440.00/sh. Current VFINX price is $490.27/sh. Per Yahoo Finance, adjusted close price is adjusted for splits, dividends and/or capital gains distributions.
evestor
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Re: Did Your Money Really Double Every 7 Years?

Post by evestor »

This is a fun thread.

Back in 2012, I left my first full time job I had in my career. I had been contributing to that 401K from 2002 to 2012, starting with smaller numbers and then eventually the max allowed as the years went on (ie as my income went up).
I never did a rollover of that 401K. It is still in the company plan as I type this note. I also have not been allowed to contribute a dollar since 2012 since I have not worked there.
So since 2012, it's been all growth.

Now, the investments in there have changed as I pivoted the strategy within that plan for one reason or another (all part of maintaining my overall AA). A mix of S&P 500 index fund and some bond oriented stuff. I have truly enjoyed watching it grow over the years for much of the reason OP says.

Here's the math (sadly Fidelity only gets me look back at statements for 10 years so I can't give you every step from the start).

When I left this job in 2012, it had low to mid $200K balance in it.
7/2014: $305K
1/2015: $306K
1/2016: $305K
1/2017: $332K
1/2018: $390K
1/2019: $358K
1/2020: $449K
1/2021: $524K
1/2022: $607K
1/2023: $493K
Today: $618K

The Fidelity website lets me generate a single statement over that period. It is fun to see it say that from 7/1/2014 to 5/17/2024, my personal rate of return was 102.6% :)
Obviously I under-performed the market since I had a bunch of fixed income in this acct too. And more recently I've pivoted more and more towards FI in this acct (as I mentioned above, maintaining my overall AA while doing some tax optimization). But even still, it's done great!

Thanks OP for causing me to look this up.
HappyPappy
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Re: Did Your Money Really Double Every 7 Years?

Post by HappyPappy »

HappyPappy wrote: Sun May 19, 2024 5:37 pm https://archive.nytimes.com/www.nytimes ... .html?_r=2

I'd love to see an updated version of this kind of chart. This chart shows that 20 year periods with average rates of return at 7% above inflation are actually by far the exception, starting at 1920 and ending at 2010.
So for the 70 years from 1920 to 1990, only 14 out of 70 twenty year periods yielded a rate of return that would have caused the investment to double every 7 years. That's only 20% of the time.

In reality though, just about no one makes a single lump sum investment over the course of their lives. More likely, investors are adding money to their portfolios over a number of years and so real world returns would be some average of the outlined squares.

But, to the OP's point, I think this chart says that based on the S&P and its surrogate's performance over the past 70 years, "no, you should not expect a lump sum investment, without contributions, to double every 7 years - if it does, you are lucky"
secondcor521
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Re: Did Your Money Really Double Every 7 Years?

Post by secondcor521 »

HappyPappy wrote: Sun May 19, 2024 5:37 pm https://archive.nytimes.com/www.nytimes ... .html?_r=2

I'd love to see an updated version of this kind of chart. This chart shows that 20 year periods with average rates of return at 7% above inflation are actually by far the exception, starting at 1920 and ending at 2010.
The chart says it includes dividends but is after taxes and fees, yet doesn't explain what the assumptions are around taxes and fees. Makes it hard for me to rely on something that is missing that sort of information. I tried clicking on the underlying link but got a 404 not found.
gips
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Re: Did Your Money Really Double Every 7 Years?

Post by gips »

oilrig wrote: Tue May 14, 2024 12:26 pm
cshell2 wrote: Tue May 14, 2024 12:16 pm I do have one fund that I know was 22K in the Fall of 2002 (the year I quit my job and rolled it to an IRA). I have not added a dime to that in the past 22 years and it is now worth 226K, so more than doubled every 7 years.

2X - 44K
4X- 88K
8X - 176K
This is exactly the kind of info I was looking for. Its very encouraging. Thanks!
I’m confused by your question, this is exactly the info you’re looking for? Why don’t you use a compound interest calculator?
Zillions
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Re: Did Your Money Really Double Every 7 Years?

Post by Zillions »

oilrig wrote: Tue May 14, 2024 9:56 am Average annual S&P 500 returns since 1957 have been around 10%, which means in theory that money doubled every 7 years using the rule of 72.

Im approaching the $1 million mark in my 30's, and I'm wondering if that money will really compound to $32 million in 35 years, assuming a 10% return (I know its not a guarantee), and assuming that money doubles every 7 years and I add nothing else to it. I know 10% returns are never guaranteed, I know theres inflation, and I know anything can happen from now until then, but Im just using 10% for the sake of this topic and from historical returns.

Im curious, for those who had a million or a similar amount in the S&P 500 20-30 years ago, did your money double every 7 years and you ended up with $20-30 million+ after not adding another dime?
NO. I wish it had, though! I will admit, though, that the last 10 years have been very good to our retirement accounts.

However, going forward, I only expect it to double every 15 years, quite frankly. That still wouldn't be a bad thing, given where I started (with nothing!)
Topic Author
oilrig
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Re: Did Your Money Really Double Every 7 Years?

Post by oilrig »

gips wrote: Mon May 20, 2024 12:47 am
oilrig wrote: Tue May 14, 2024 12:26 pm
cshell2 wrote: Tue May 14, 2024 12:16 pm I do have one fund that I know was 22K in the Fall of 2002 (the year I quit my job and rolled it to an IRA). I have not added a dime to that in the past 22 years and it is now worth 226K, so more than doubled every 7 years.

2X - 44K
4X- 88K
8X - 176K
This is exactly the kind of info I was looking for. Its very encouraging. Thanks!
I’m confused by your question, this is exactly the info you’re looking for? Why don’t you use a compound interest calculator?
Because I wanted to see real life examples from posters on here versus some compound interest calculator. I understand how compound interest works, but I think seeing real life examples makes it more "real" for me.
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watchnerd
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Re: Did Your Money Really Double Every 7 Years?

Post by watchnerd »

oilrig wrote: Tue May 14, 2024 9:56 am Average annual S&P 500 returns since 1957 have been around 10%, which means in theory that money doubled every 7 years using the rule of 72.

Im approaching the $1 million mark in my 30's, and I'm wondering if that money will really compound to $32 million in 35 years, assuming a 10% return (I know its not a guarantee), and assuming that money doubles every 7 years and I add nothing else to it. I know 10% returns are never guaranteed, I know theres inflation, and I know anything can happen from now until then, but Im just using 10% for the sake of this topic and from historical returns.

Im curious, for those who had a million or a similar amount in the S&P 500 20-30 years ago, did your money double every 7 years and you ended up with $20-30 million+ after not adding another dime?
In addition to tax drag, the S&P 500 has not returned 10% per year in the 21st century.

Performance since 2000 has been closer to 7%.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
tesuzuki2002
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Re: Did Your Money Really Double Every 7 Years?

Post by tesuzuki2002 »

oilrig wrote: Tue May 14, 2024 7:35 pm
tesuzuki2002 wrote: Tue May 14, 2024 6:05 pm I think you need to apply other considerations as tax drag as well as knowing that in 30 years... $35 million will spend like $15M due to inflation and other factors, so right there that is enlightening.

do you plan to just leave the $1M sit for 35 years. I'm planning to retire will before 70 so I'm not sure why I would let it sit in an account for that long.
No, I plan to keep adding to the million, and withdraw during retirement. It was just kind of a hypothetical question and something I was curious about from others.
Great plan !! I'm on a similar path.. You mentioned 30s and I'm in my early 40s. I'm at the $2.5 Million mark.. and at this point it seems new contributions are doing very little if anything.. Most of future gains will likely grow from the accumulation of the base NW that I have built up.

I also plan to spend more and on the next down turn, I may like concentrate my income back into investing into the downturn... to reap the additional rewards.
EnjoyIt
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Re: Did Your Money Really Double Every 7 Years?

Post by EnjoyIt »

oilrig wrote: Tue May 14, 2024 12:38 pm
ResearchMed wrote: Tue May 14, 2024 12:30 pm
UpperNwGuy wrote: Tue May 14, 2024 10:25 am
...
There is no way to know because I've been putting new money into my portfolio every month, and I've also added some large amounts resulting from financial windfalls.

I monitor my portfolio as a whole, not fund by fund. My portfolio also includes small caps, international, and bonds. All of those have dragged down returns compared to a 100% S&P 500 portfolio.

If I want to see what the S&P 500 portion of my portfolio has done, I go to Portfolio Visualizer. Whatever the index has done, that portion of my portfolio has done the same (minus expenses).... and that is true for everyone else who responds to your question.

This ^^ is the answer, from UpperNwGuy.

Almost all of us have holdings other than the "S&P 500". And most of us are either adding at least some money over time, if in the accumulation period, or perhaps removing some money, if in the "using the retirement money during retirement" period.

But to *see* how the S&P 500 "does" (or did), use some measure of just that, the S&P 500!
Then you don't need to worry about any effects of each person's tinkering/adding/subtracting from their portfolio, or if they invest in anything other than the S&P 500.

And if you want to know what *your* investment in S&P 500 would have done over the past X years, find that figure, and then deduct whatever fees you might have. That alone should be interesting, if you happen to have relatively high fees and don't realize how that can eat away at the total amount.
It's not tricky.

You've been a BH member for several years now.
You should realize that almost no one would fit your criteria of:
"... those who had a million or a similar amount in the S&P 500 20-30 years ago, did your money double every 7 years and you ended up with $20-30 million+ after not adding another dime?"
Your question really needs to be a thought experiment, or a simple research task looking at the actual returns over the <number of years you are interested in>.

And your question assumes that the returns are constant over time, which is not real life.
But that assumption will give you your answer from the historical total returns of S&P 500.

GC
Yea I get it, maybe it was a dumb question lol. As I reach a million, I was just thinking a lot about my portfolio lately and the future doubles I have left. There were a few posters above who gave examples of a lump sum of money and how it fared throughout the years without additional contributions.

I got my answer :)
The way I took this information many years ago was that once we hit a critical mass, as long as we can keep from spending from that portfolio, we will have enough to retire without any further contributions. This allowed us to semi retire. It worked out well. We hit our retirement number and have since surpassed it. Today, there are some months we make enough money to cover our expenses while on other months we need to pull from the portfolio as if we were retired. I figure as long as we keep our withdrawals well below 4% (which we do,) our portfolio will continue to grow, and that is exactly what has happened.

Hitting critical mass early in one's life is a big deal.
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