We all would love to double our money, and there are lots of ways we might possibly do it, but they’re not all equally attractive. Winning a lottery jackpot may be the easiest, but it’s the least likely to work. The real estate market right now is hot, and you might be able to make a lot of money in it, but that can be risky, too. Cryptocurrencies such as Bitcoin are very popular, but they, too, are problematic.
One of the most rational ways to double your money is via the stock market. It likely won’t happen in a single year, but it can happen several times in your investing time frame.
The table below shows how money can grow at a reasonable (but not guaranteed) annual rate of 8%:
Growing at 8% for | $5,000 Invested Annually | $10,000 Invested Annually | $15,000 Invested Annually |
---|---|---|---|
5 years | $31,680 | $63,359 | $95,039 |
10 years | $78,227 | $156,455 | $234,682 |
15 years | $146,621 | $293,243 | $439,864 |
20 years | $247,115 | $494,229 | $741,344 |
25 years | $394,772 | $789,544 | $1.2 million |
30 years | $611,729 | $1.2 million | $1.8 million |
35 years | $930,511 | $1.9 million | $2.8 million |
40 years | $1.4 million | $2.8 million | $4.2 million |
Here are three ways to go about doubling your money.
1. Growth stocks
Growth stocks are just what you might imagine they are — stocks of companies that are seeing relatively rapid increases in revenue, profits, and even profit margins. These companies are generally firing on all (or most) cylinders and have lots of investors very excited about their futures. The stocks will often seem overvalued (trading for more than their fair, or intrinsic, value), but growth investors will invest in them anyway.
Netflix has been a classic example of a growth stock, as has Amazon.com. It’s worth noting, though, that they haven’t soared in a straight line — each has had periods when its stock has declined.
Growth stocks, when they behave as expected or hoped, can double your money faster than other kinds of stocks. But they do often carry more risk than other stocks.
2. Value stocks
Growth investing has a counterpart — value investing. Value investors, like growth investors, naturally want their investments to grow in value, but they aren’t willing to ignore valuation. They aim to buy stocks for less than their intrinsic value, thereby building in a margin of safety. For example, if their research and number-crunching determines that Scruffy’s Chicken Shack (ticker: BUKBUK) is worth around $40 per share, they will not buy into it at $60 per share, but might do so at $30 per share.
Value stocks can also double your money, but it might take longer than with growth stocks. As a value investor, you might also need to exit some value stocks once they reach or exceed their intrinsic value, so…
Read More: 3 Proven Ways to Double Your Money