Can You Really Double Your Money by Investing?
Investing strategies that could help you double your money
Investing is the act of putting your money into various financial instruments in order to earn a return over time. A lot of people think that investing is some sort of get-rich-quick scheme. You know the drill: plunk down a couple thousand pounds, watch your money grow, then retire on a yacht in the Mediterranean. In reality, though, it's not quite that simple. Yes, you can double your money by investing—but there are no guarantees, and some strategies are riskier than others.
Being able to double your money by investing is such a common phenomenon that there’s a simple rule you can use to determine how long it will take you to double your investment: This is known as the rule of 72. Simply put, you take the number 72 and divide it by your expected rate of return. On average over the past 30 years the stock market return was about 7% when adjusted for inflation, so that could be a good expected rate of return to use.
Let’s pretend you want to see how long it will take you to double a £10,000 investment.
You take the number 72, and divide it by the expected rate of return (7% in our case): 72/7 = 10.3, so you would expect to double your money in about 10 years. However this of course is quite a rough estimate, and you could do significantly better, or significantly worse, depending on your investment strategy and the assets you choose to invest in.
To decide which investing strategy is best for you, it's important to do some research and gain an understanding of the risks and rewards involved. Whether you're new to investing or looking to take your investing skills to the next level, there are many tips and strategies that can help you double your money and start investing like a pro. Let’s start by taking a look at some of the possible asset types you can invest in.
The Stock Market Is Risky Business
The stock market is notoriously volatile, and even the savviest investors can lose a ton of money in a matter of days, or even hours. If you're thinking of investing in stocks, it's important to remember that you could lose everything you put in. That being said, stocks have the potential to make you a lot of money—if you're willing to take the risk. One of the most risky investment strategies is day trading, in which a whopping 80% of day traders lose money, with a further 10% breaking even and only 10% coming away with a profit. On the other hand, a long-term buy and hold approach has historically provided consistent returns over the long term.
The key to investing in the stock market successfully is to find a company that is doing well and invest in their stock. If the company continues to do well, then the value of their stock will go up, and you'll make money. An alternative route to possible success is to invest in mutual funds or index funds. These are collections of stocks that are managed and chosen by professionals. They're often a bit safer than investing in individual stocks, and they have the potential to make you a lot of money if they do well.
Of course, there's always the risk that you could lose money when you invest. But if you take the time to do your research and diversify your investments, you can minimise that risk and still double your money. So if you're looking for a way to grow your money, investing in stocks is definitely worth considering. Want to give it a try but not sure where to start? One beginner-friendly option is Wombat - download it for free today.
Bonds Are More Stable, but May Offer Lower Returns
If stocks are too risky for you, bonds might be a better option. Bonds are loans that corporations and governments sell to raise money. When you buy a bond, you're essentially loaning someone money with the promise that they'll pay you back later with interest. Because bonds are less volatile than stocks, they're often considered to be a safer investment. But because they're not as risky, they also don't offer as much potential for growth. That said, they may be right for you if you have a lower risk appetite, or even as a tool to help diversify your portfolio to protect against a recession.
Crypto - a New Road to Investing
Cryptocurrencies are a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are decentralised, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Crypto has seen a huge rise in popularity in recent years, with more and more people investing in cryptocurrencies like Bitcoin, Ethereum, and Litecoin. This can certainly offer great returns in some cases - people have made millions in a very short timespan, however many have lost all this money just as quickly as they made it. While appealing for the speed of the potential growth, cryptocurrencies include the possibility of price volatility, the potential for fraudulent activities, and a lack of regulatory oversight, which make them quite a risky choice on your path to doubling your money. If you choose to pursue this avenue, make sure you do your due diligence, and if possible, look into sources on both sides of the crypto debate.
Property - Expensive, but Worth It?
Investing in real estate means spending money now so that you can earn more money back in the future. When you invest in a house, you are buying it to live in or to rent out to other people. When you rent out a house, you get paid every month by the person who is living there. And when you own a house, you can sell it later for more money than you bought it for, due to general inflation causing the value of the house to increase, or via improving the value of the house yourself through renovations. This type of investing can be incredibly rewarding, but the barriers to entry are a lot higher than the other options, and the manual hands on work and time required (as well as the up front capital) can prevent this being an option for many people. If you like the idea of investing in the real estate business but can’t afford to buy a house right now, you could consider investing in stocks or ETFs that back varying property companies. The barrier to entry for investing in property stocks is much lower, and can be a valuable component of your overall portfolio and investing strategy.
So, back to the question at hand - can you double your money by investing?
The short answer: maybe. While there is no guarantee that you will make any money through investing, let alone double your money, it is possible to grow your wealth through investing in the stock market, real estate, or other asset classes. However, it is important to remember that investing is a risk and there is always the potential to lose money. That being said, if you're thinking about investing your hard-earned cash, there are a few things you should keep in mind.
If you're new to investing, it's important to start small. Investing a larger sum of money can result in a higher return, but it also comes with more risk, especially for a new investor who hasn’t invested before.
So, if you're just getting started, it's a good idea to start with a smaller amount of money. You can always increase your investment over time as you become more comfortable with the process and the risk involved, and you learn what strategies feel most comfortable for you.
Create a Diversified Portfolio
When you invest in the stock market, you're purchasing shares of publicly traded companies. These companies can be in various sectors ranging from tech to retail to healthcare.
It's important to create a diversified portfolio so that you're not putting all of your eggs in one basket. For example, if you only invest in tech stocks and the tech sector takes a hit, then your entire portfolio will suffer as a result. However, if you're invested in multiple sectors, then the impact on your portfolio will be less severe.
A good diversification strategy can involve investing in multiple industries, multiple asset types (e.g. stocks, bonds, commodities, etfs), and even multiple countries (investing in European, Asian, American companies or bonds). This helps to protect against drops due to a specific industry or country going through a downturn.
Know your goals
Another key factor in successful investing is setting financial goals. Having clear goals will help you determine which types of investments are right for you, and it can also help you stay motivated and focused as you start investing your hard-earned money. It’s important to set a budget and determine first how much you can comfortably and safely afford to invest.
Remember, only invest the money that you can realistically afford to lose (that doesn’t mean it won’t sting if it happens!). You should never put yourself in a position where you are needing to sell down investment assets to pay bills. Always take care of your basic needs first. Next, figure out and understand what it is you’re actually investing for. Is it to buy a house in a few years? To save for your child’s education? To have a more comfortable retirement? Knowing your goals and how much money you will need to accomplish them will help you to stay on track and make sensible investing decisions.
Investing isn't a get-rich-quick scheme—it takes time and patience to see results. It's important to remember that investments can go up and down in value; sometimes they will make money and sometimes they will lose money. One of the most consistently successful investment strategies is to “buy and hold”. This means choosing to invest money into assets you plan on holding for a long time - many years or even decades! Statistically speaking, this has shown to be a much more successful strategy than trying to time the market, to buy and sell at the perfect time.
After all, there is no way to predict the future, so it’s almost impossible to guess the perfect time to buy or sell something. If it was easy, everyone would do it and be successful! Note that while historically, buying and holding stocks has shown to be a stable and consistent way to generate wealth and even double your money over the long term, there is no guarantee that this trend will continue into the future. Past performance of the market can give us clues as to what will happen in future, but as with all investing, there are no guarantees, and you may make back less than you originally put in.
Investing comes with risks, but it could help you to grow your wealth and even double your money over time—just don't expect overnight success. If you're thinking about venturing into the world of investing, start small and create a diversified portfolio so that you're not putting all of your eggs in one basket. Make sure to set a budget and keep your financial goals in mind. And most importantly, be patient—it takes time to see results from investments.
At the end of the day, doubling your money through investing is entirely possible - as long as you carefully choose your investments and stay disciplined in both your strategy and your attitude towards risk. With good research, planning, and persistence, you can certainly achieve financial success through smart investing!