Hi {{first_name}},

Last month I was building the model on a development deal, a mixed-use building underwritten to double investor capital in 36 months (more on that below!). And out of habit, I ran a quick check on the S&P to see what I was giving up in public markets. 

The check is the Rule of 72. You divide 72 by your return and you get the years it takes to double. At 10%, that's 7.2 years. It’s what a lot of advisors build all their advice on. 

Great! But then I realized there’s more nuance to that number. There’s a lot you have to account for before you hit your actual return goal. The 10% is the brochure number. An average of the good years and the bad. 

Your balance grows at something a little lower, and inflation pulls it down lower still. Strip both out and the S&P's real rate sits closer to 7%. 

Run what you calculate through the Rule of 72 and the honest doubling time is 10.3 years. That’s three years longer. Realistically it’s ten years to double your money, after inflation. 

That's the accurate clock. We just usually choose not to read that one. 

For years I've told people the same thing about the market. Count on about 7% a year, and your money doubles roughly every decade. I've even said it in this newsletter. 

So when a deal crosses my desk, that honest S&P number is the bar it has to clear. The building I was modeling was underwritten to double investor capital every three years. That's the underwriting math, and the operator has to go earn it.

Drop $100,000 into the S&P and another $100,000 into the deal, and leave both alone for a decade. At the S&P's honest rate it doubles once, to about $200,000. At this deal's pace it doubles every three years, to north of a million dollars. The same hundred grand, same ten years, and an $860,000 gap between them. The only variable is how fast the money doubled.

That gap is the entire game. The speed your money doubles at is what decides whether the number you're aiming for shows up inside your working years or a decade past them. Almost everyone has heard of the Rule of 72. But it’s rare that we turn the table on our own portfolio and see what the math says. 

This issue is about how to turn it around and look at your own money. Prepare to dig into:

Let’s get to it.

— Walker Deibel
WSJ & USA Today Bestselling Author of Buy Then Build
Founder, Build Wealth

P.S. The building I’m so excited about is our next major development deal. I’m focused on the $3M raise on this mixed-use building with a 36-month 2x return target. It closes tomorrow, June 24th! 

We have room for a handful of additional investors. The soft commitment is due by June 24th but funding can happen anytime through the end of June. If you are interested, details are available here. Signup and look for BuildRise III: Rollick.

We've all seen the shorthand. The S&P does about 10% a year, your money doubles roughly every seven years. Love it, mean it.

But there's more tucked behind that number than it lets on, and the gap it hides is measured in years of your life.

Start with the number your advisor quoted. It was likely that 10%, the S&P 500's long-run nominal return, dividends reinvested, across nearly a century of data.

Then inflation takes its cut. Subtract the ~3% average CPI over the same period, and you're left with a real compounding rate of around 7%.

The doubling math:

That conversion, which is the rate into years, is the definition of the Rule of 72. Divide 72 by your rate and you get the time it takes to double. 

Every CFA candidate learns that equation in week one. 

This sets up the only question worth answering as you read this newsletter.  How many honest doubles do you have left, and how many is your current allocation leaving on the table?

The Rate Ladder

Returns live in your head as statistics. Was it a good year, a bad year, or simply the average? The Rule of 72 turns them into time. The full ladder, bottom of the capital stack to the top.

Every rung carries the same inflation haircut, so the honest doubling times all sit a few years longer than the nominal ones above. 

Savings to bonds buys back 32 years. Bonds to the S&P, another 9. The S&P to top-quartile private markets — from 7-plus years per double to under 4 — is the move that bends a 20-year trajectory more than any other allocation decision you'll make.

The Doublings Gap

A percentage gap is easy to wave off. Fourteen points between 10% and 24% sounds meaningful and abstract at the same time. Count it in doublings over a fixed 20-year horizon and the abstraction disappears, because doublings arrive in whole numbers, and the last one is worth more than all the earlier ones put together.

At ~7% real, your money doubles about twice in 20 years. $1M becomes roughly $3.9M. 

At 18%, a rate available to accredited investors in well-underwritten private markets, doubles 5x. That same $1M becomes $31.9M. If you up the stakes, 25%+, the floor for top-quartile institutional deals, you get close to seven doublings, and $1M becomes $122M or more.

You start with the same capital, and a 20-year horizon. The variable is the rate and the rate is a choice.

The most useful question you can ask yourself is "how many times does this position double my capital before I need it, and how does that compare to what I'm holding now?"

The Oldest Number in Finance

The Rule of 72 is truly ancient. The earliest written record of it comes from 1494, in a text by a friar named Luca Pacioli. He is the same man who gave us double-entry bookkeeping and the title "father of accounting." He wasn’t strictly the inventor but he wrote it down properly. The merchants of Renaissance Venice, Italy were using it daily to price how fast their money doubled.

Five hundred years later the tool is unchanged, and so is the lesson. Real capital has always been about the rate. It's the only input that compounds on itself, which makes it the highest-leverage decision in an entire portfolio.

The fastest moving rates lived in places not all investors could reach like direct business ownership, private credit, and real assets. The math always favored them yet access was a barrier.

A gap Build Wealth works to close. Running the operator diligence on private offerings and opening the door for accredited investors to compound at a rate public markets rarely touch.

Diversification Won't Move Your Doubling Rate

Diversification is where investors are happiest to spend their energy, because it feels like climbing. Add enough asset classes, enough geographies, enough sectors to smooth the ride, and all that motion feels like it's carrying you up the ladder.

But sideways. Diversification earns its keep as a risk tool and does almost nothing for your doubling rate. You can spread capital across twelve asset classes that all return 8–10% and you’re still doubling every 7–9 years. You've managed your volatility and yet stayed on the same rung.

The investors who close the gap pose a sharper question.  Which slice of my capital can move to a higher rung without compromising the liquidity and stability the rest of the portfolio needs? 

They size that slice on purpose and measure progress in doublings per decade.

We ran the full math in this week's report. Read the full work up, Time Is the Real Asset.

You may be able to quote your return to the exact decimal. It’s a talent investors want to show off. But can you outline your doubling time? The one number says how fast an entire portfolio compounds. 

This audit gives you your real doubling time. With that number, the next move is to find the capital dragging it down. Bring your latest statements to the table and set aside about 20 minutes to work. 

The goal is to walk away with three things. Your blended doubling time, your drag positions, and the years one reallocation buys back. The math is pretty straightforward to get you to all three. 

72 ÷ your rate = years to double

Step 1: List every position and assign an honest rate.

Pull every account and holding. Next to each, write the annual rate you truly expect to compound at — the rate you expect, not the best case on the pitch deck. Use nominal expected rates across the board so public and private are compared on the same footing. The long-run index return for public holdings, the offering IRR for private ones or the rate capital had to grow to hit the projected outcome. 

For example, an investor brings $2.3M in investments which looked like this:

Step 2: Get your blended doubling time.

Measure each rate by its share of the portfolio and then add them up. Here’s a practice test. 

A portfolio lands at 11.2%. Then run your one line:

72 ÷ 11.2 = 6.4 years to double.

Over a 20-year horizon, that's about 3.1 doublings, and $2.3M becomes roughly $19.7M. Write that number at the top of the page — it's the honest trajectory of your portfolio exactly as it sits today. (Inflation stretches across every timeline a couple of years longer, so read this as the nominal best case.)

Step 3: Find your drag.

Doubling drag is capital sitting in low-rate positions with no job to justify the slow rate. Plenty of slow capital is doing real work and stays put: cash for a deal closing next month, a bond maturing into a known expense in two years, an index sleeve posted as ABLOC collateral. 

Run one question across every slow position. What is this doing that a higher-rate position couldn't? The answer is - liquidity, a near-term liability, collateral — means leave it alone. "Nothing," or "it's always been there," means you've found drag.

In the example, the $400K in bonds and $300K in cash earn scrutiny. Say $200K of that cash is on call for deal flow. The remaining $500K, bonds plus idle cash, is doing nothing but averaging the portfolio down at under 4%. That's the drag.

Step 4: Run the smallest fix.

Find the smallest move that buys back a doubling. Take only the drag (the $500K) into a single well-underwritten private position at 20%, the conservative end of the top-quartile range. 

The blend climbs to 14.7%, and your one line says:

72 ÷ 14.7 = 4.9 years to double.

Put into practice and that's about 4.1 doublings over 20 years, and the same $2.3M becomes roughly $38.9M.

The doubling time drops from 6.4 years to 4.9, the portfolio picks up a full extra doubling, and the ending number moves about $19M. 

For accredited investors at this level, the drag worth moving lands between 15% and 25% of total capital, enough to shift the blended rate two to four points while leaving the liquidity and stability the rest of the portfolio provides untouched. Size it to the jobs your portfolio needs done, and move the part that isn't doing one.

You can start by opening your statements and writing one number at the top. Your blended doubling time. Then circle every position earning under 5% and ask each one what job it's doing. The positions that can't answer are your drag. 

Now you know, in years and in dollars, exactly what they cost you.

The nautilus has been compounding at a fixed rate since before the dinosaurs, making it a better long-term allocator than Wall Street. (The nautilus builds its shell at a constant rate as it grows, over and over.)

Did this land in your inbox via a friend or colleague? Subscribe to get your own weekly insight into private markets.

Already a reader? Help other investors open their eyes to the private markets and forward this to someone who would value the insight. Or hit reply to tell us what you think.

By continuing to receive the Wealth Stack newsletter, you acknowledge and accept our Privacy Policy, which includes the sharing of subscriber engagement data with select advertising partners.  

To unsubscribe, click here.

This is not financial advice. Illustrative output of a reasoned thought experiment. Not a backtest, guarantee, or prospectus. Actual results vary based on market conditions, fund selection, timing, fees, taxes, and factors not modeled. Private credit, CRE, and leveraged strategies involve significant risk including loss of principal. Consult a qualified financial advisor.