Someone once quipped that the best way to double your money is to fold it in half. That's amusing, but it's not going to help you build a nest egg for retirement. Since few of us are financially independent, most of us need to be saving and investing for our future financial security.
If you have $10,000 socked away, you'll want to double it to $20,000, and then double it again, to $40,000, and again and again, to $80,000, $160,000, $320,000, $640,000, and perhaps beyond. Here's how you might go about doubling your money.
Image source: Getty Images.
1. Have ample time
First, you'll need ample time in which to keep doubling your money. You're not likely to go from $10,000 to $600,000 in a few years, but as the "Rule of 72" shows, you can probably double your money every seven to nine years, on average, if you earn an average annual return of around 8% to 10%. (The stock market's long-term average annual return is around 10%, though it can be lower -- or higher -- over shorter periods and even a few decades.)
If that seems like it will take too long to get where you need to be -- having enough money for retirement, for example -- know that there are ways to speed up the process of doubling your money. Keep reading.
2. Have a solid growth rate
Another way to be sure you're doubling your money at a decent clip is to aim for a good growth rate. You might hope for 50%, but that's not likely to happen. A 10% average annual return would roughly match the overall stock market's long-term growth rate, but it might grow more slowly or briskly over the next few decades.
Here's how your money might grow, if you're making annual investments of $10,000:
|
Growing for |
Growing at 6% |
Growing at 8% |
Growing at 10% |
|---|---|---|---|
|
10 years |
$139,716 |
$156,455 |
$175,312 |
|
15 years |
$246,725 |
$293,243 |
$349,497 |
|
20 years |
$389,927 |
$494,229 |
$630,025 |
|
25 years |
$581,564 |
$789,544 |
$1.1 million |
|
30 years |
$838,017 |
$1.2 million |
$1.8 million |
|
35 years |
$1.2 million |
$1.9 million |
$3.0 million |
|
40 years |
$1.6 million |
$2.8 million |
$4.9 million |
Data source: Calculations by author.
3. Have money to invest
Finally, you'll need money to invest, and the more the better. You can amass a lot if you start with very little, but for best results, aim to invest aggressively, and often -- perhaps even 20% or more of your income.
The table below shows what you might amass depending on how much you can invest each year:
|
Growing at 8% for |
$10,000 invested annually |
$15,000 invested annually |
$20,000 invested annually |
|---|---|---|---|
|
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 |
Data source: Calculations by author.
For best results...
So what's your best strategy for doubling your money effectively? Well, aim to incorporate all three points above -- invest meaningful sums for a long period, growing at a solid rate. You can get roughly the same return as the overall market if you opt for a low-fee, broad-market index fund, and that's an excellent investing strategy.
If you want to shoot for even better growth rates than those offered by the overall stock market, you might add some growth stocks to your portfolio. They're tied to companies growing at faster-than-average rates, and together, they may average annual growth rates of 15% or more over longer periods. Growth stocks can be riskier and/or more volatile investments, so consider following The Motley Fool's investing philosophy, which suggests owning 25 or more stocks, aiming to hold them for at least five years. That approach can give even overvalued stocks a chance to grow -- or to fall, and then recover.
So take some time to assess where you are in your investments, and where you need to be in the future. Working on doubling your money multiple times can get you there.
