Doubling your money isn’t something you should expect to do overnight. However, with the right approach, it’s possible to double your money over time. If you’re looking to double your money through investments, here are the five common strategies to consider.
A financial advisor can help you create a financial plan for your investment needs and goals.
5 Ways to Double Your Money
There are many ways to double your money, but most of them take time. If someone you don’t know approaches you, promising you can double your money every year, you should be extremely skeptical. The strategies below tend to take longer, but they can be effective if you say the course.
1. Take Advantage of 401(k) Matching
Do you have an employer-sponsored retirement plan, such as a 401(k)? If so, your employer might match your contributions 1:1 up to a percentage of your salary. That means that up to a point, your employer will match every dollar you contribute to the plan.
For example, they might match your contributions up to 6% of your salary. So, if your base pay is $50,000, your employer will match your contributions up to $3,000. While doubling your money isn’t always easy, this is one of the quickest and easiest ways to see your money multiply.
2. Invest in Value and Growth Stocks
Understanding value and growth stocks can get a bit technical, but at their most basic level, both are stocks that can outperform the competition. Value stocks are stocks that are underpriced according to the fundamentals. Meanwhile, growth stocks are stocks that are growing more quickly than the market.
Value stocks and growth stocks have the same basic appeal: both are stocks that have the potential to grow more quickly than the market. However, growth stocks are stocks that analysts feel have not fully realized their potential; they are often small- and mid-cap stocks. Conversely, value stocks are often large, established companies that appear to be trading at a price that undervalues them now.
3. Increase Your Contributions
If you want to reliably grow your net worth, it might be necessary to simply increase your retirement contributions. As tantalizing as it is to imagine getting rich from nothing, it isn’t something most of us should expect.
When you first start investing, it might seem like your money isn’t growing much, but often that is because your money hasn’t had enough to compound.
As an example, let’s say you invest $6,000 per year at a 7% rate of return. If you add your all of your contributions over 10 years, you would have saved $60,000. However, using SmartAsset’s investment return calculator, you will see that you can make roughly $34,700 through compound interest. Andincreasing your contributions over time can help you reach a bigger investment goal sooner.
4. Consider Alternative Investments
Broadly speaking, alternative investments are any investments that are not stocks, bonds or cash. Thus, alternative investments can include a variety of investments, such as private equity, real estate, commodities, collectibles and cryptocurrency.
Alternative investments can be a double-edged sword. Some can be highly speculative, which might allow you to double your money more quickly with alternative investments. But their speculative nature also means you can lose money on them just as fast as you made it. Thus, without research, analysis, and perhaps a bit of luck, it probably won’t be easy to double your money with alternative investments.
5. Be Patient
You have probably heard that patience is a virtue, and the idea very much applies when you want to double your money. Building wealth takes time, and one of the most common mistakes people make is to get impatient when their money isn’t growing fast enough.
But as the graph above shows, it’s not uncommon for your wealth to grow slowly in the first several years before it starts to grow quickly. The rule of 72 tells us that it takes over 10 years to double your money with a 7% return (72/7 = 10.28).
Our example shows that you have about $78,000 after 10 years. But it only takes until around year 15 to have another $78,000. We make our next $78,000 inside of year 20. You see where this is going. People have a tendency to pull the plug on their investment strategy before the rapid gains begin to take hold. It’s critically important to be patient and give your strategy the time it needs.
Bottom Line
If you want to double your money, it’s important to commit to your strategy and let your money grow over time. In general, the more risk you are willing to assume, the faster you can double your money. But some of the most speculative investments may have a high chance of failure, so it’s a good idea to strike the right balance. For most investors, taking advantage of 401(k) matching and increasing retirement contributions are still the most reliable ways to see your money grow quickly.
Tips for Investing
- Deciding how to allocate your portfolio isn’t always easy. A financial advisor can help you reach your investment goals.SmartAsset’s free tool matches you with up to three financial advisors who serve your area. Plus, you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Unsure how much your investments will grow over time? Try SmartAsset’s free investment calculator to estimate how much you will have in 10, 15 or 20 years. Whatever your time horizon might be, it’s important to know where you stand. If you want to see where you stand, use our free calculator.
Photo credit: ©iStock/Moyo Studio, ©iStock/kate_sept2004
