Few of us have saved enough for retirement, so most of us should be actively saving and investing for the future. Ideally, we will double however much we have saved by now, and then double it again and again.
Here are five money-doubling strategies to consider.
Inage source: Getty Images.
1. A 401(k) company match
The first way to double your money is nearly effortless. If your employer offers a 401(k) plan, it's usually a very good idea to participate. Better still, since many companies offer matching 401(k) contributions, if you invest at least enough to max out that match, you'll be collecting as much free money as you can from your company.
Matches often double your contribution, to a certain degree. Some, for example, will match your contributions dollar for dollar, perhaps up to the first 3% or more of your salary that you pitch in. That's a perfect example of doubling your money: It's a guaranteed 100% return. There are other company-match formulas, too, such as matching 50% of your contributions up to 6% of your salary. That one doesn't double your 6%, but it gives you a total of 3% of your salary.
2. The magic of compounding
Compounding is simply math that demonstrates how numbers (such as interest or stock investments) can grow over time. Check out the table below, showing how much a single investment of just $1,000 can grow, at an average annual rate of 8%:
|
Over This Period... |
...$1,000 Will Grow to: |
|---|---|
|
5 years |
$1,469 |
|
10 years |
$2,159 |
|
15 years |
$3,172 |
|
20 years |
$4,661 |
|
25 years |
$6,848 |
|
30 years |
$10,063 |
|
35 years |
$14,785 |
|
40 years |
$21,724 |
|
45 years |
$31,920 |
|
50 years |
$46,902 |
|
55 years |
$68,914 |
|
60 years |
$101,257 |
Calculations by author.
You see that your original $1,000 more than doubles in 10 years, and more than doubles again after 20 years, and 30 years, and so on. You'll double your money even faster if you're not waiting for a single investment to grow and are instead adding to your investments over time. For example:
|
Growing at 8% for |
$10,000 Invested Annually Becomes: |
$15,000 Invested Annually Becomes: |
$20,000 Invested Annually Becomes: |
|---|---|---|---|
|
5 years |
$63,359 |
$95,039 |
$126,718 |
|
10 years |
$156,455 |
$234,683 |
$312,910 |
|
15 years |
$293,243 |
$439,865 |
$586,486 |
|
20 years |
$494,229 |
$741,344 |
$988,458 |
|
25 years |
$789,544 |
$1,184,316 |
$1,579,088 |
|
30 years |
$1,223,459 |
$1,835,189 |
$2,446,918 |
Calculations by author.
Inage source: Getty Images.
3. Dividends
Investing in dividend-paying stocks is another good way to work on doubling your money. They're stocks like any other, with their prices rising over time as long as the companies are healthy and growing. But along with that usual stock-price appreciation come dividend payments, which also tend to grow over time. That's a powerful one-two punch.
Imagine Hats for Cats Inc. (ticker: SNZZY), paying $2 per year in dividends and increasing that payout by 10% annually. In a mere seven years, the dividend will have grown to $3.90, having nearly doubled, so you'd be collecting nearly twice as much in cash per year from your shares. As long as the company kept performing well, your income would keep growing over time -- along with the stock price.
4. Growth stocks
Growth stocks are a great way to not only double your money, but potentially triple or quadruple it, or more. Growth stocks sometimes can be more volatile and risky, though, and they're often trading at rather lofty levels. So approach them carefully, and aim to buy the ones that seem the most undervalued while offering a lot of potential.
Follow our Motley Fool investing philosophy and you'll buy 25 or more stocks, while aiming to hold them for at least five years. Doing so should give you a decent chance of having one outstanding performer (or many) and having your winners far offset your losers.
5. Value stocks
Another way to double your money in stocks is via value investing, which entails less risk than growth investing because value investors seek a margin of safety before committing their hard-earned dollars to any stock.
Don't assume that being a value investor dooms you to slower-growing companies, either. Even growth stocks can be undervalued at times, offering the best of both worlds. For example, Meta Platforms (the company formerly known as Facebook) was recently trading with a price-to-earnings (P/E) ratio of 23.6, considerably lower than its five-year average of 30.9, and a price-to-sales ratio of 8.5, also below its five-year average of 10.7. It's a company that reported its third-quarter revenue was up 35% year over year and earnings per share up 19%. It's clearly both a growth stock and a value stock.
These are some of the many ways you might go about doubling your money. They're not the only ones, though. You might, for example, invest in real estate successfully, or take on a side gig or two to double the money with which you can invest. However you do it, aim to increase your assets significantly over the years ahead.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
5 Proven Ways to Double Your Money - Motley Fool
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