Over the past few years, a number of different ideas have been announced to help you double your money, and fast. Among them: cryptocurrencies, NFTs, and formerly lesser-known stocks like AMC Entertainment and GameStopto name a few.
Since the markets for many of them have fallen dramatically over the past few months, now is a good time to review the tried and true ways people have doubled their money. It may take some patience, but there are a few key things you can do to ensure your money doubles over time.
1. Get your company’s 401(k) match
In the most literal sense, receiving your business correspondence is one of the easiest ways to double your money. Most employer 401(k) plans offer some level of matching, which means you will receive a 100% return on contributions to the plan up to a specified limit. The limit usually ranges from 2% to 6%.
Let’s say you earn $100,000 and receive a 5% match from your employer for all contributions to your 401(k) plan. In other words, if you contribute $5,000 to your 401(k) plan in a given calendar year, you will receive $5,000 from your employer as a matching contribution. A 100% return!
While employer matching won’t make you a millionaire overnight, it will get you in the habit of steadily funding your retirement account and easily doubling your efforts.
2. Keep investing when the market is down
With the Avant-garde S&P500 Funds (NYSEMKT: VOO) down double digits to start 2022, many people (understandably enough) want to run away from investing altogether. In fact, now is the time to do the exact opposite: it’s time to raise and lower your overall base cost in the titles you already own. Those who stay the course and allow their automatic retirement deposits to continue are likely to be the real winners in the long run.
Investing when the market is down also has an amplified effect if you reinvest your dividends and capital gains (this can usually be automated in your account settings, depending on your broker). In other words, when dividends and capital gains are paid out, you will automatically buy more shares of the same investment at lower prices. When the market finally recovers, you will end up with more than you started with.
3. Focus on big markets
It’s a more prudent strategy to simply choose the broad index – including all market segments – and continue to invest despite the poor headline numbers. It boils down to diversificationthe concept of allocating your money around different economic sectors.
Conversely, playing “hot stocks” has probably landed you in hot water, especially if you started investing recently. Over the past two years, it’s been incredibly easy to get caught up in the tech stock craze, especially when fund managers like Cathie Wood were getting double- or triple-digit returns investing in emerging tech.
Year-to-date, most Wood’s ARK Invest funds are down more than 50%, with no signs of a decline.
As shown in the chart below, the losses of tech-intensive funds like the ARK Innovation Fund (NYSEMKT: ARKK) were particularly intense on the descent:
A $10,000 investment in the ARK innovation fund at the start of the year would now be worth less than $5,000, while a broadly diversified index fund, like the Vanguard S&P 500 fund, is still worth more than $8,600. . Good diversification can help limit losses, even when it feels like the world is falling apart.
All this to say that by sticking to the broad markets, you are much more likely to achieve stable long-term results that offer an attractive risk-reward ratio. By engaging in such a strategy, you’ll harness the power of compound interest and see your money double (or triple!) more smoothly and reliably.
Focus on controllable variables
Of course, you can’t control what the market will do tomorrow, next week, or next year. But you can control your own behavior. Focus on proven ways to double your money, and time will take care of the rest. By qualifying for your company’s match, continuing to invest when the market is down, and diversifying appropriately, you will see your portfolio balance double in due course.
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