What Happens When You Double $1000 Every Year? (Insights)
Doubling our investments is the basic goal of every investor, and it’s no secret that the key to success is compound interest. But what exactly happens when we double our investments every year?
Or, what would happen if we invested $1000 every year to be exact, and doubled it? In this blog, we will explore the power of compound interest and see what happens when you double $1000 every year.
So whether you are planning or just curious, this article is for you!
Understanding Compounding Interest
Alright, let’s break down this whole interesting thing – there are two kinds: simple and compound.
Simple interest is pretty easy. You lend $10 to a friend, they give you back $12. That extra $2 is simple interest.
Compound interest is a bit more fun. Let’s say your friend pays you interest not just on the original $10, but also the interest you’ve already earned. So, the $2 you got as interest? Your friend pays interest on that too!
So you will be getting $2.40 as interest next time and the cycle continues.
Picture a snowball rolling down a hill, getting bigger with each roll. It starts small, but over time, it can get really big. That’s the magic of compound interest. It grows your money faster and faster as time goes on! It’s no coincidence that the book about Warren Buffett is called Snowball.
The Journey of $1000 Doubled Every Year
$10 is too small of an amount to consider for investment, so let’s take $1000 instead. Say you invest $1000 at a 10% interest rate every year. After one year, your investment will double and you’ll have $2000.
Plus, you’ll earn 10% interest on the initial $1000 – so 10% of $1000 is $100 – making your total investment worth $2100.
But wait, there’s more! The next year, your total investment will double again, bringing it to $4200. And the interest earned will also double from last year, so you’ll earn 10% of $2000 – which is $200. So after 2 years, you’ll have a total of $4400.
So just after 2 years, your $1000 will turn into $4400 – which is more than 4 times the original investment – this is the power of compounding.
Let’s take a look at this chart to get an idea of what might happen if you keep doing the same thing for the next 20 years:
| Year | Return |
| Year 1 | $2,100 |
| Year 2 | $4,400 |
| Year 3 | $8,400 |
| Year 4 | $16,800 |
| Year 5 | $33,600 |
| Year 6 | $67,200 |
| Year 7 | $134,400 |
| Year 8 | $268,800 |
| Year 9 | $537,600 |
| Year 10 | $1,075,200 |
| Year 11 | $2,150,400 |
| Year 12 | $4,300,800 |
| Year 13 | $8,601,600 |
| Year 14 | $17,203,200 |
| Year 15 | $34,406,400 |
| Year 16 | $68,812,800 |
| Year 17 | $137,625,600 |
| Year 18 | $275,251,200 |
| Year 19 | $550,502,400 |
| Year 20 | $1,101,004,800 |
As you can see, just by doubling your investment every year for 20 years, your initial $1000 has turned into more than a billion dollars! This is the magic of compound interest and the power of doubling.
Let’s make a table of the returns and amounts:
