If you want to double your money, learning how to invest is a good alternative to a traditional bank savings account. Investment strategies can help you boost your wealth for long-term or short-term financial goals, and the more you know the more you can earn.
If you’re new to investing, take your time to learn the ropes before you put money in. Consult with an experienced financial advisor to build a strong portfolio that meets your needs and reduces the risks of doing it alone.
Here are seven investment opportunities that may help you double your money with the right know-how to secure your financial future.
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Many employers offer 401(k) plans to help you save for retirement and match your contributions as an employee benefit. While you won’t benefit from this investment immediately, your employer’s contributions will double your investment over time, and you can stretch each dollar further with interest.
Employers typically match your contributions to a certain percentage or a specific dollar amount. Find out your employer’s policy and adjust your contributions to make the most out of your employee benefit and bank “free” money.
Best for: Contributing to your 401(k) is important for everyone who wants to retire, and it’s especially beneficial for young investors who have decades to watch their nest egg grow with interest. However, you won’t be able to spend this money until you retire.
New investors: The sooner you begin contributing to your 401(k), the better off you’ll be when you’re ready to retire. To maximize your eventual returns, adjust your savings plan to contribute the majority of your savings budget to retirement planning.
Large, time-tested stocks won’t double your money quickly, but they can be a secure investment opportunity for new investors. Blue chip stocks are stocks in well-established companies whose products and services are largely trusted and valued. Companies like Coca-Cola, Disney and P&G are major industry leaders that aren’t disappearing anytime soon.
Investments in blue chip companies return an average 10% of their value in a year. So you can expect to double your investment within 10 years. If you really want to see growth, consult an advisor about diversifying your portfolio to earn more with less overall risk.
“In general, it's best not to put all your eggs into one basket. Investors should try to create portfolios that provide adequate exposure to U.S., emerging market, and international holdings as part of an overall investment plan,” says Jenna Lofton, investor and trader with Stock Hitter.
Best for: A diversified portfolio is important for any investor, and blue chip stocks are a relatively secure way to make big returns over a long period of time. These investments are best for people who can afford to wait for their returns.
New investors: Exchange-traded funds (ETFs) are a basket of securities that can hold many types of investments and are purchased or sold on a stock exchange. They're a good way to get started in blue chip stocks without putting all of your money in a specific company or two. Consider the companies included in the fund, as well as the ETF’s annual yield, expenses and share price.
Investment bonds are a good choice if you really want to play it safe or diversify your portfolio. They take longer to mature than stocks and they require more cash up-front to buy in. Bonds usually start around $1,000.
“A big benefit of investment bonds is they limit your downside. It can be scary when you're starting out, and bonds help hedge your risk.”
Bonds are appealing because they’re generally considered safe, but know that they’re not without risk. You purchase bonds with a set rate of return (RoR), and if newer bonds have a higher interest rate, then you may be forced to sell your bond at a discount when it matures. “The important thing is to check interest rates. As interest rates increase, bond prices decline and vice versa,” recommends Nik Sharma, investor and CEO of Sharma Brands.
Other risks include inflation risk, default risk and reinvestment risks. If the bond’s issuer defaults and can’t repay your bond, then you may lose all of your investment — though you can review a bond’s rating to gauge the default risk before you buy. Otherwise, you’re unlikely to lose your investment with bonds, though your investment may lose value through inflation and other market factors.
Best for: Investment bonds are great for beginners and people wanting to grow their savings. They cost more up-front than stocks, so you should have a good amount of disposable income to invest and be comfortable without until the bond matures.
New investors: If you’re looking for a safe investment, look into government investment bonds with a AAA rating and save up to cover the initial investment costs.
Trading on margin allows you to borrow money from a bank to partially fund your stock investment. You’ll be required to repay the bank their loan amount plus interest, but you can significantly increase your investment payout by contributing a larger sum of money.
“When done successfully, this can provide a convenient and low-effort source of revenue. However, it is risky for all but the most experienced traders,” says Ann Martin of CreditDonkey.
While you can double your money quickly with smart investments, trading on margin is much riskier than other opportunities. You’re responsible for paying your total loan whether your investment is successful or not. A poor investment can put you in a debt hole, so this is best for experienced investors.
Best for: Trading on margin is great for experienced investors who know how to assess a stock’s risk and rewards fully, and who have enough disposable income to pay out a loss without risking financial security.
New investors: Trading on margin is not recommended for new investors. If you have some experience and want to try margin trading, start small and look for companies in growth industries and with established long-term growth.
Oversold stocks are investments that are selling for a lower value than what’s typical for the company. Bad news from the company, current industry trends or a slowing market can all cause a typically fruitful company’s stocks to fall in value.
The goal of buying oversold stocks is to identify a falling stock, catch it when it’s at its lowest and hold until value returns to normal or improved levels. Investors use the price-to-earnings ratio and price movements to determine when a stock is oversold.
This is safest with large and stable companies that may fluctuate between seasons or competitor releases, but are unlikely to fail. However, it’s never without risk. Well-known companies aren’t inherently stable investments, and it can be hard to judge when an oversold stock has bottomed out and if it will ever return.
It’s always a good idea to consult with a financial advisor before making a large investment — particularly for inexperienced investors.
Best for: Oversold investments are best for experienced investors who can confidently identify market trends. They can be easy to misjudge, so it’s always a good idea to consult with a financial advisor.
New investors: Consult with a financial advisor to take advantage of these inexpensive stocks with potential for large returns. Do your research and learn the tools used to evaluate oversold stocks so you can make a confident investment decision.
Long-term investments are held for at least a year, though you may choose to hold for years or decades if you can. Long-term investments are good opportunities for stocks that are considered generally safe.
“A smart option for most beginners is to invest in mutual funds or exchange-traded funds that are based on broad-based index funds, such as the S&P 500 or the Russell 2000 Growth Index,” recommends Andrew Latham, personal finance counselor and editor of SuperMoney.
Buying for the long-term allows you to build your stocks’ value without as much concern about market volatility, because your investments are likely to recover. Short-term investments are riskier because you can lose money easily in a bad year, but more often than not the S&P 500 offers between 10% to 30% returns.
“Invest $10,000 today in the S&P 500 or the Russell 2000 Growth Index, and there is a good chance you will have around $20,000 in your brokerage account by 2028.”
Best for: Long-term investments are an important part of any investor’s balanced portfolio. These are especially great for investors who want to reduce or avoid the stress of a fluctuating stock market.
New investors: Learn the differences between an index fund and ETF, and a cap-weighted or equal-weighted fund to choose the fund that’s right for you. Invest an amount of money that feels comfortable for you and leave it for the long run. You can always purchase more stocks later.
Buying a house is one of the most tangible ways to double your money and build your personal wealth. If you have a good credit score and can afford a substantial down payment, you can make big returns within seven years.
If you can pay a 20% down payment, a 20% increase in your home value would double your initial investment. The average home increases value by 3.8% each year, which means you’d double your money within five years.
You’ll have to do your due diligence and study the national and local real estate market when you buy. Your home may lose value in some markets if the housing bubble bursts. You also have to consider the mortgage, insurance and repair costs that come with homeownership. Generally, you’d be paying into rent with no returns anyway, but homeownership isn’t a fit for every lifestyle.
Best for: Homeownership is a great way for anyone to redirect their rent and housing costs to grow their personal wealth. The opportunity to double your money through equity is strongest for individuals who can afford a significant down payment of 15% or more.
New investors: Consult with a local real estate agent to learn more about your housing market. Enroll in a homebuyer education program to learn the financial aspects of owning a home and potentially benefit from state and federal homebuyer assistance programs.
The Rule of 72 is a simple way to determine how long it will take to double your money. You just divide 72 by your return rate to get an approximate number of years until your investment doubles. It’s not entirely accurate and becomes less reliable the higher your RoR, but it’s good for a quick ballpark calculation. Working with a financial professional will give you more insight into your savings strategies and timeline.
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Double Your Money
The Rule of 72 can also be used to quickly estimate long-term costs of fees and interest paid. For example, if you pay 10% interest on your credit card, you’ll double your credit card debt within eight years.
Learning to invest is the best way to double your money and set yourself up for financial success. Investing always comes with some risks, so do your research to identify safe opportunities, avoid emotional investments and consult with a financial advisor for personalized investment strategies.