Do you want to double your money? Even with higher interest rates than previous years, it is difficult to use a bank account to earn a significant amount of money. In order for investors to double or even triple their money, they will often do somust accept a certain riskfor the possible reward.
To achieve this level of return over time, there are a number of low-risk options. Meanwhile, those looking to turn off the lights and double their money quickly can also have their share of high-risk, high-reward options to choose from.
Below are five possible ways to double your money, from low risk to highly speculative.
5 Ways to Double Your Money
1. Get a 401(k) match
Talk about the easiest money you've ever made! It doesn't get easier or lower risk to double your money than by taking advantage of an employer match401(k) account. Then you can go ahead and use the tax benefits of the scheme to increase your pension savings.
Many employers give employees money just to contribute to their own retirement accounts. For example,employers can match a small percentageof what you add to the bill – so you put in 5 percent of your salary and your employer adds another 5 percent. It's the easiest way to make money with the lowest risk, and you'll still get all the great benefits of a 401(k) plan.
If there is a downside, it is that some companies require you to remain employed for a certain period of time, often three or four years, before these matching funds are sold.fully deserved.
This here401(k) calculatorcan help you figure out how much wealth you can build for retirement.
2. Invest in an S&P 500 index fund
An index fund based on the Standard & Poor's 500 index is one of the more attractive ways to double your money. Although investing in a mutual fund is riskier than a bank CD or bonds, it is less risky thaninvest in some individual stocks. Plus, the S&P 500 is made up of about 500 of America's largest and most profitable companies, so it's astrong opportunities for long-term investments.
Ofalso has attractive long-term returns averaging about 10 percent per year over long periods. This means that on average you can double your money in just over seven years. That said, returns in one year will likely be very different – higher or lower – than the average. And the S&P 500 can also go through long losing streaks. For example, the index had negative returns in the 2000s. The S&P 500 made up for that in the 2010s with a 252 percent return – more than tripling.
and you don't need much expertise to invest this way.
3. Buy a house
Real estate may not seem like the way to double your money quickly due to its reputation for slow and steady gains rather than explosive growth. But if you look at how most transactions are structured using a mortgage,you will quickly notice that buying a house can lead to doubling your income.
It can be relatively easy to double your money by purchasing real estate. That's because homebuyers often rely on leverage – i.e. a mortgage – to make the purchase.
For example, imagine buying a $200,000 home with a typical 20 percent down payment. You deposited $40,000 (and we are excluding it).closing costs and similar costs). How much does your home's value need to increase before you can double your money? Only 20 percent. When your home increases in value to $240,000, you get the original $40,000 down payment plus a $40,000 capital gain, for a total profit of 100 percent. That's the power of leverage.
Unlike other investments here, you will obviously be forced to invest additional money to keep your home in good condition, keep up with property taxes, and keep making mortgage payments. This means an extra monetary outlay, but otherwise you would have to pay rent and be on the hook if you are the owner.
4. Cryptocurrency trading
The volatility of cryptocurrency – whether it isBitcoin, Ethereum of Dogecoin– is an opportunity for speculators to make money trading. Of course, there is also the possibility of losing money, but that is always part of the consideration if you want to double your money quickly.
While many cryptos have risen sharply in recent years, they can bounce back and forth significantly, making it difficult to hold on when they fall.Losing money with cryptocurrency is easyif you can't manage your positions and there are much easier and less risky ways to double your money.
5. Trading options
Options trading is one of the fastest ways to double your money – or lose it all. Options can be lucrative, but also quite risky. But to double your money with them, you have to take some risk.
The biggest pros (and cons) of options occur when you buy call options or put options. You can make two, three or four times your money or more. Here's a quick overview of the two main types:
- INcall optiongives you the right, but not the obligation, to buy a stock at a certain price within a certain date when the option expires.
- INput optiongives you the right, but not the obligation, to sell a stock at a certain time, at a certain price, at the expiration of the option.
You pay a price to own an options contract, and that premium can increase in value many times over. The downside is that the option can expire completely worthless. So you don't want to risk all your money on a single roll of the option die.
Dealers also have the choice betweenless risky but less lucrative options strategies, Also. And while you're at it, there's no reason not tominimize your trading costs by working with a top broker.
How quickly can you double your money? Refer to the 72 rule
Everyone wants to know how quickly they can double their money. There's actually a simple trick that can help you quickly estimate when you can double your money. It is calledRule 72.
The principle is simple. Divide 72 by the annual return to calculate how long it will take to double your money. For example, if you earn an annual return of 8 percent, it will take about 9 years for it to double. So the higher the return, the faster you can double your money.
But remember it's an estimate, so your number only gives you an estimated number. Furthermore, the bigger problem is that if you invest in the financial markets, your returns will vary significantly from year to year. This means that your returns each year will likely be much greater than average.
In short
If you want to double your money in a reasonable time frame, you have to take some risk. You simply won't be able to earn enoughsafe banking productsto achieve that goal. Above all, it's important to remember that you don't have to make the riskiest trades (which are more like gambling than investing) to build your wealth. You have high-return options that can limit (but not eliminate) your risk, such as a house, S&P 500 funds and 401(k) matching.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
