Do you want to double your money? Even if interest rates are higher than previous years, it is difficult to use a bank account to make a significant amount of money. In order for investors to double or even triple their money, they will often have to take some risk for that potential 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 choose from a number of high-risk, high-reward options.
Below are five possible ways to double your money, ranging from low risk to highly speculative.
5 Ways You Can Double Your Money
1. Get a 401(k) match
Talk about the easiest money you’ve ever made! It doesn’t get any easier or lower risk to double your money than by taking advantage of an employer match to a 401(k) account. Then you can stay and use the plan’s tax benefits to grow your retirement savings.
Many employers only give employees money because they contribute to their own retirement accounts. For example, employers can match a small percentage of what you add to the account, so you contribute 5 percent of your salary, and your employer adds another 5 percent. That’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 the matching funds are fully vested.
This 401(k) calculator can 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 stock fund is riskier than a bank CD or bonds, it is less risky than investing in a few individual stocks. Plus, the S&P 500 is made up of about 500 of America’s largest and most profitable companies, so it’s a good option for long-term investing.
The S&P 500 also has attractive long-term returns, averaging about 10 percent per year over long periods. That means, on average, you can double your money in just over seven years. That said, returns in a single 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 this in the 2010s with a return of 252 percent – more than tripling.
It’s easy to buy an S&P 500 index fund 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, given its reputation for slow and steady gains rather than explosive growth. But if you look at how most mortgage transactions are structured, you quickly see that buying a house can double your mortgage.
It can be relatively easy to double your money by purchasing real estate. That’s because homebuyers often rely on the power of leverage – i.e. a mortgage – to make the purchase.
For example, imagine buying a $200,000 house with a 20 percent down payment, as usual. You put down $40,000 (and we exclude closing costs and similar expenses). How much does the value of your home need to increase to 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 gain of 100 percent. That’s the power of leverage.
Of course, unlike other investments here, you will be forced to invest more money to keep your home in good condition, keep property taxes current, and keep paying off the mortgage. That means even more money has to be spent, but otherwise you would have to pay rent and you can benefit from owning it.
4. Cryptocurrency trading
The volatility of cryptocurrency – be it Bitcoin, Ethereum or Dogecoin – is an opportunity for speculators to make money trading. Of course, it is also a chance to lose money, but that is always part of the consideration if you want to double your money quickly.
While many cryptos have soared in recent years, they can bounce back and forth significantly, making it difficult to hold on when they fall. It’s easy to lose money on cryptocurrency if you can’t manage your positions, and there are much easier, lower-risk 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 advantages (and disadvantages) 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:
- A call option gives you the right, but not the obligation, to buy a stock at a specific price on a specific date, at the end of the option’s term.
- A put option gives you the right, but not the obligation, to sell a stock at a certain price and at a certain time, upon expiration of the option.
You pay a price to own an options contract, and that premium can increase in value many times over. The disadvantage 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 dice.
Traders also have a choice of options strategies that are lower risk, but less lucrative. And while you’re at it, there’s no reason not to minimize your trading costs by working with a top broker.
How quickly can you double your money? Look at the Rule of 72
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’s called the Rule of 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 approximate 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 lumpier than the averages.
In short
If you want to double your money in a reasonable time frame, you have to take some risk. You simply cannot earn enough with secure banking products to achieve that goal. Above all, it’s important to remember that you don’t have to make the riskiest trades – trades that are more like gambling than investing – to build your fortune. 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.