"Step right up! Double your money!" It sounds like a scam or a carnival barker, right? But doubling your money isn't just a pipe dream, or something that only happens over many decades.
Here are three strategies for doubling your money. Ideally, you'll be able to double it -- and then double it again!
No. 1: Invest for a long time -- and regularly
Sure, you can double your money over several decades, but that's if your money is growing at a rather slow rate, such as if it's in a bank savings account, money market account, or certificates of deposit. You can probably do better than that, such as by investing in stocks.
Also, invest regularly. If you're aiming for a nest egg sufficient to support you in retirement, it's probably not going to be good enough to invest a chunk of money once and then wait for it to grow, or to add to it occasionally, whenever you have some extra cash. Ideally, you should be socking away money regularly -- perhaps every month or quarter -- and meaningful sums, too.
It needn't take many decades to double your money, but it will take some time -- and determination. Check out the table below:
Growing at 8% for
$5,000 invested annually
$10,000 invested annually
$15,000 invested annually
No. 2: Aim for a solid growth rate
Clearly, your money will need to be growing at a good clip if you want to double your money in a not-too-long period. For most people, stocks are the best bet for long-term growth, and the table below, reflecting the research of Jeremy Siegel who studied returns from 1802 to 2012, shows that:
Annualized Nominal Return
You might do even better than 8% in your investing, and the table below shows how long it takes to double your money at different growth rates. It's illustrating the "Rule of 72," where you divide 72 by your growth rate, and the result is the number of years it will take for your money to double:
Years to Double
The handy rule is surprisingly accurate much of the time, but it gets less so at growth rates above 25% or so.
No. 3: Avoid money-losing blunders
Finally, as you diligently save and invest in stocks regularly over many years, aim to avoid as many blunders as possible. There are lots of common investing mistakes to avoid, such as not understanding what you're investing in or trading too frequently. There are also some risky investment strategies and techniques to avoid, such as buying into penny stocks or investing with margin.
The more errors you avoid, the less money you'll likely lose, and the faster you'll see your portfolio grow. For best results, keep reading and learning about investing throughout your financial life.
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