Looking to double your money? With interest rates so low, it’s hard to use a bank account to earn a significant amount of money these days. For investors to double or even triple their money, they will often have to take some risk for this potential reward.
To achieve this level of return over time, there are a number of options that carry limited risk. Meanwhile, those looking to turn off the lights and quickly double their money also have their share of high-risk, high-reward options to choose from.
Below are five possible ways to double your money, ranging from low risk to highly speculative.
1. Get a 401(k) match
Talk about the easiest money you’ve ever made! It’s no easier or less risky to double your money than by taking advantage of an employer match on a 401(k) account. Then you can stay and use the plan’s tax benefits to grow your retirement savings.
Many employers give money to employees only to contribute to their own retirement account. For example, employers may match a small percentage of what you add to the account – so you contribute 5% of your salary and your employer adds an additional 5%. It’s the easiest, lowest-risk way to make money, and you still get all the benefits of a 401(k) plan.
If there’s a downside, it’s that some companies require you to remain employed for a certain period, often three or four years, before these matching funds are fully vested.
This 401(k) calculator can help you determine how much wealth you can build for your 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 most 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. Additionally, the S&P 500 is made up of about 500 of America’s largest and most profitable companies, so it’s a solid option for long-term investing.
The S&P 500 also has an attractive long-term return, averaging around 10% per year over long periods. This means that on average you will be able to double your money in just over seven years. That said, the return in any given year is likely to be significantly different – above or below – from the average. And the S&P 500 can also experience long losing streaks. For example, the index had a negative return during the 2000s. The S&P 500 made up for it in the 2010s, returning 252%, more than tripling.
Buying an S&P 500 index fund is easy and you don’t need a lot of expertise to invest this way.
3. Buy a house
Real estate may not seem like a way to double your money fast, given its reputation for slow, steady gains rather than explosive growth. But if you look at how most transactions are structured using a mortgage, you’ll quickly see that buying a home could result in a doubling.
It can actually be relatively easy to double your money buying real estate. This is because homebuyers often rely on the power of leverage – aka a mortgage – to make the purchase.
For example, imagine buying a house for $200,000 with a 20% down payment, as is usually the case. You will deposit $40,000 (and we will exclude closing costs and similar expenses). How much does the value of your home have to increase for you to double your money? Just 20 percent. When the value of your home increases to $240,000, you will have the initial down payment of $40,000 plus a capital gain of $40,000 for a total gain of 100%. This is the power of leverage.
Of course, unlike other investments here, you’ll be required to invest more money to keep your home in good shape, keep up with property taxes, and keep paying off the mortgage. That means spending more money, but otherwise you’ll have to pay rent, and you get a benefit from owning it.
4. Cryptocurrency trading
Cryptocurrency volatility – be it Bitcoin, Ethereum or Dogecoin – is an opportunity for speculators to make money trading. Of course, it’s also an opportunity to lose money, but that’s still part of the trade-off if you’re looking to double your money fast.
While many cryptos have skyrocketed over the past year, they can rebound significantly, making it difficult to hold on when they fall. It can be easy to buy high and sell low and bail out when prices crash, and you’ll end up putting money in someone else’s pocket instead of yours. .
It’s easy to lose money on cryptocurrency if 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 will have to take risks.
The biggest advantages (and disadvantages) of options occur when you buy call options or put options. You could make two, three or four times your money back or more. Here is a brief 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 when the option expires.
- A put option gives you the right, but not the obligation, to sell a stock at a specific price at a specific time when the option expires.
You will pay a price to own an option contract, and that premium could increase several times in value. The downside is that the option could expire completely worthless. So you don’t want to risk all your money on a single roll of the options dice.
Traders also have a choice of lower risk but less lucrative option strategies. And while you’re at it, there’s no reason not to minimize your trading fees by using a top broker.
How fast can you double your money? Watch the rule of 72
Everyone wants to know how long they can double their money. There’s actually a simple trick that lets you quickly estimate when you can double your money. This is called the rule of 72.
The principle is simple. Divide 72 by the annual rate of return to determine how long it will take you to double your money. For example, if you earn an annual return of 8%, it will take about 9 years for it to double. So the higher the yield, the faster you can double your money.
But remember that this is an estimate, so your number will only give you an approximate number. Moreover, the biggest problem is that if you invest in the financial markets, your return will vary considerably from year to year. This means that your yields are likely to be much lumpier each year than average.
At the end of the line
If you’re looking to double your money in a reasonable amount of time, you’ll have to take some risk. You simply won’t be able to earn enough safe banking products to achieve this goal. Above all, it’s important to remember that you don’t have to do the riskiest trades – the ones 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 home, S&P 500 funds, and a 401(k) counterparty.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Further, investors are cautioned that past performance of investment products does not guarantee future price appreciation.