Where To Invest To Double Your Money

Key Takeaways

6 ways to double your money
Double your money with real estate

Not happy with your income in 2020? You might be wondering how to double your money in 2021. Investing represents an excellent opportunity to increase your earnings, but only when executed correctly.

There are numerous investment types to choose from, but six stand out as ways to generate significant income. Read through the following list to learn more about how to start doubling your money this year, and get ready to think about risk vs. reward.

How to Double Your Money: 6 Strategies

Don't get fooled by "get rich quick" schemes. If there were an easy way to double your money in a short amount of time, then everybody would be doing it. If you want to increase your investment returns as quickly as possible, then you'll have to be dedicated, disciplined, and patient.

For investors, the best way to double your money is to generate high returns. How can you do that? Just use one of these six investment strategies:

The Rule of 72
Bond Investing
Employer Matching
Stock Options
Oversold Stocks
Cryptocurrency

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how to double money

1. The Rule of 72

The Rule of 72 is a principle that all investors should know. It's a classic investment tool that can help you gauge how long it will take for an investment to double in value.

Divide 72 by an annual growth rate or interest rate, and you'll get how many years it will take to double your investment. For example:

72 / 2% Growth = 36.0 Years

If your investment earns 2% every year, then it will take 36 years for that investment to double in size.

The higher the growth rate, the less time it will take to double the investment:

72 / 4% Growth = 18.0 Years

72 / 15% Growth = 4.8 Years

72 / 20% Growth = 3.6 Years

72 / 25% Growth = 2.9 Years

Here's the big question: how do you obtain a growth rate of 10% or more?

As you can see from the numbers above, you need a growth rate of at least 15% if you want to double your investment within five years.

There are three ways you can produce a higher growth rate:

Invest More Money
Invest for a Longer Period
Choose High-Return Investments

Invest More Money

The more money you invest, the more income you can amass.

Let's say that you invested $1,000 annually, and it grows at 12% per year:

1 Year: $120
5 Years: $600
10 Years: $1,200
17 Years: $2,040

At $1,000 invested annually, it would take 17 years for the investment to double.

But what if you invested $3,000 annually, at the same growth rate?

1 Year: $360
5 Years: $1,800
10 Years: $3,600

Let's compare:

Doubling Your Investment

$1,000 Invested Annually: 17 Years
$3,000 Invested Annually: >10 Years

Creating a Passive Income

5 Years at $1,000 Invested Annually: Passive Income of $600 Annually
5 Years at $3,000 Invested Annually: Passive Income of $1,800 Annually

Many Americans can't afford to invest $3,000 per year. But you should try and invest as much as you have available so you can shorten the amount of time it takes to boost your returns. If you're only investing $250 annually, try investing $500 annually. Whether you have a retirement fund or hold shares in an ETF, do whatever you can to increase your annual contributions to your investments.

One of the best ways to get extra money for your investments is to cut down expenses. As Will Rogers once said, "The quickest way to double your money is to fold it in half and put it in your back pocket."

Invest for a Longer Period

Even if you can't invest a large amount of money annually, your money will significantly increase over a longer period.

If you're a long-term investor—and especially if you're investing for retirement—then you won't be as pressed to make high contributions so long as you're going to be making contributions for 30 years or more. You'll have a lot more money leftover for your monthly budget, too.

IRAs, 401(k)s, and index funds are terrific investments for long-term investors.

Choose High-Return Investments

Investments that offer the highest returns tend to be higher risk. Conversely, investments that provide the lowest returns tend to be lower risk.

Blue-chip stocks generate the highest returns—about 10% on average. But individual stocks are also considered high-risk, and there's a greater chance you could lose money, especially if you're going to hold the stocks for only three or four years.

However, it's hard to get excited about low-risk investments, like government bonds, which only generate 5% to 6% returns.

Your best bet is to find a middle ground. Broad market index funds and ETFs are excellent because they're bound to generate higher returns, but they also don't carry as much risk. Look for ones that track the S&P 500, which is a well-diversified index that's historically reliable.

Remember: it's safer and easier to invest for a longer period than to bank on high-risk returns.

2. Bonds

For the sake of portfolio diversification, it's helpful to invest in a mix of stocks and bonds. That will protect you if there's a recession or if the company you've invested in goes through a rough financial period.

As mentioned in the last section, bonds don't generate the highest returns—only 5% to 6% annually. But they're a lot safer than individual stocks, and their returns are usually consistent, which is helpful for budgeting.

Safety is a big deal. While a 10% return might sound like a great way to double your money, you could lose your entire investment if the stock value plunges or if the company goes under.

If you have a family or if you have more extensive financial obligations, a bond might be a better investment option for you.

3. Employer Matching

Does your employer match your 401(k) contributions? If so, you have in your arsenal one of the best and easiest ways to double your money. This is an approach that's only suitable for investors who are planning for their retirement.

Most employers match 50 cents for every dollar, which is a whopping 50% return on investment. If you prioritize your 401(k) contributions, you could vastly increase your retirement fund.

Even if your employer doesn't offer a 401(k) or employer matching, you can get similar tax benefits by opening and contributing to an IRA. You'll either get a tax subsidy up-front or when you retire (depending on whether you have a traditional or Roth IRA.

4. Stock Options

Stock options are the fastest way to generate very high returns. But it's also the riskiest method because it requires substantial speculation.

Unfamiliar with options?

An option is a contract that gives you the right to buy or sell a certain amount of shares in a company (usually 100) at a predetermined price and a specified point in the future.

You pay a premium price for the options. Before the contract expires, you can buy or sell at a "strike price," which could be lower or higher than the shares' value.

There are puts and calls:

Put Option: Allows you to sell stocks at a specific price before the expiration of the contract.
Call Option: Allows you to buy stocks at a specific price before the expiration of the contract.

There are several different ways you can leverage options in your investment strategy. Still, if you're trying to double your money, then you'll want to speculate whether a company's stocks will rise or fall and then purchase options accordingly.

You should avoid stock options unless you're a seasoned investor. They're difficult to invest in because not only do the stocks need to rise/fall as you predict, they also need to rise/fall within the time frame that's designated by the option.

A successful option move could generate returns that are 10% or much higher. But there's a whole lot of speculation involved, and it's very risky. Read our deep dive on stock options if you're interested in them.

5. Oversold Stocks

Sometimes, the best opportunity to buy stocks is when a stock's price plummets, and you're able to purchase many shares for a lower price.

That's not to say you should purchase bad stocks—stocks in companies that are performing poorly or which are grossly overvalued. The goal is to buy stocks that have been oversold.

Every so often, a profitable company may go through a slump, and frightened investors will bail out and sell their shares. If you believe that the company will rebound, you could seize upon the opportunity to buy more shares for less.

Individual stocks are a high-risk investment, so you must know how to do stock research if you're going to hunt for oversold stocks. Stock research will help you understand:

Whether or not a company is capable of rebounding/remaining profitable
Whether or not a company has strong leadership and a solid business plan
Why the company's stock dropped in the first place. Was there a financial scare? Change of leadership? New competitor? Overhype?

These factors will help you understand whether the stock will rise in value and generate high returns.

6. Invest In Cryptocurrency

Cryptocurrency has become a buzz-worthy investment type over the last several years, and it only continues to grow in popularity. This rise can be partially attributed to the lack of barriers to entry and the high-yielding nature of this investment. Cryptocurrency represents an opportunity to grow your money quickly and on a platform outside of more traditional investment types.

It must be said that while cryptocurrency offers a high reward potential, there is also a level of inherent risk to be aware of. Part of the concern is that cryptocurrency is not regulated in the traditional sense. It is known to be a highly volatile investment. While you could earn a lot of money investing in cryptocurrency, you could also lose it all as the market changes.

If you are curious about how to invest in cryptocurrency, the best place to start is online. Research which options you are interested in, whether that be Ethereum, Bitcoin, Litecoin, or something else. Seek out educational resources that will better prepare you for the nature of this investment type.

best way to double your money

How to Double Your Money With Real Estate

One of the best ways to double your money is by investing in real estate. Nearly all real estate investments double in time because properties naturally appreciate in value.

There are five ways to double your money with real estate:

Rent By Room
Fix and Flip
Short-Term Rentals
Buy and Hold
Use Property Investment Data

1. Rent By Room

If you're renting out a residential property to tenants, you might consider renting out the property by the room—rather than renting the entire house to a single tenant. This is an excellent way to increase your cash flow and maximize your property's return.

Some markets are well-suited for renting out individual rooms. The best markets are college towns and high-density urban areas. These locations see a greater number of tenants seeking short-term leases, or where tenant turnover is higher.

The higher rent might turn off some tenants. You could make the rental more attractive by improving the property or offering utility-free living (these are good properties for installing solar panels.

2. Fix and Flip

A fix and flip is one of the best ways to generate high returns in real estate. It also enables you to generate a high return in a very short amount of time.

The hardest part about executing a fix and flip is finding ways to keep the renovation costs down. It's best if you can learn how to do basic renovation work yourself—like flooring, painting, or landscaping.

You should only hire contractors to do highly specialized work, like roofing or plumbing. When you're hiring a contractor, find a balance between best-quality and lowest cost. You don't need to turn the home into a Bel-Air mansion—you only need to make it nice enough so that it sufficiently improves the value of the home.

3. Short-Term Rentals

Short-term rentals are often more lucrative than long-term rentals. Short-term rentals enable you to charge higher prices more frequently. This is especially true of vacation rentals.

It's possible that a vacation rental can generate as much money in one week as a leased property can generate in one month. If you own a property in an ideal location, you can make a ton of money by renting it out to travelers.

The tricky part about short-term rentals is that you'll have to do cleaning and repairs more frequently—and if you don't carefully manage these costs, they can siphon quite a bit of your revenue.

As with doing a fix and flip, you'll want to find a middle ground for hiring cleaning/repair services or property management services. A property management company might take between 10% and 25% of your revenue, but they'll also perform the necessary advertising and administrative work that you need to keep your bookings high.

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4. Buy and Hold

"Buy and hold" is the most traditional real estate investing strategy. You'll buy a property and hold it for an extended period until it appreciates. Your profit will depend on how much your property appreciates.

The key to buying and holding is finding a property in an up-and-coming neighborhood, especially those undergoing redevelopment.

Buy and hold is a long-term investment strategy. You should prioritize this strategy if you're trying to save for retirement and looking for steady and reliable returns. But it's also a good diversification option for short-term investors—it's safe to employ one or two buy and hold properties to counterbalance a string of fix and flips.

5. Use Property Investment Data

Property investment data can help you make informed investment decisions. Investment data will give you insight on:

Pricing trends for national and local markets
The demographics and interests of homebuyers
Federal and state legislation that may affect the housing market

Keeping up with this data is an everyday task for real estate investors. Get in the habit of checking real estate news every day before you get the day started or go to sleep. You can study market trends on numerous websites, like Zillow.com or Realtor.com. Bookmark them and visit them often.

Additionally, you can use a real estate calculator to help you budget for your real estate investments.

Property investment data can give you the foresight to make wise investment decisions—and to double your money.

Summary

You can double your money in 2021 by increasing the amount of money you invest, planning a long-term investment strategy, or seeking out investments that generate higher returns (retirement plans, stock options, and oversold stocks). To double your money in real estate, you may want to consider investing in short-term rentals, single-room leases, fix and flips, and buy and hold properties. Property investment data can help you choose which type of real estate investment is right for you.

Do you want to be able to retire financially comfortable?

Our new online real estate class can help you learn how to invest in rental properties that can help increase your monthly cash flow. Expert investor Than Merrill shares the core real estate investment principles that work best in today's real estate market.

The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only.