Imagine what you could accomplish by doubling your bank balance. You might fund retirement, buy a house, or get out of debt. Even better, you might compound your wealth by doubling it again.
Sounds fun, right? Get the process started with these four proven ways to double your money, ordered from least to most risky.
1. Take your 401(k) match
Taking your 401(k) match isn't as exciting as putting all your chips on red -- but it's a lot safer. In truth, an employer match in a 401(k) is probably the closest thing to a sure bet you'll find in personal finance.
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To maximize your 401(k) match earnings, you should know two things:
- Your plan's matching formula
- Your plan's vesting rules
Matching formula
The matching formula specifies how much your employer contributes to your retirement account based on your contributions. Some plans match dollar for dollar, up to a cap. Others match a percentage, say 50% of your contributions, up to a cap.
An example would be 50% matching on up to 6% of your salary. With this structure, your employer contributes 3% when you contribute 6%. That's halfway to doubling your money. You would make up the other half by investing those employer contributions and letting them grow over time.
Vesting rules
Vesting defines when you take ownership of the match. If you separate from your job before you are 100% vested, you forfeit a portion of those matching contributions.
Full vesting usually involves staying with your employer for a minimum service period. Find out what that time frame is and comply with it. That way, you won't undo your efforts to double the money in your 401(k).
2. Invest in the stock market and wait
Another doubling strategy is to invest in broad market indexes, like the S&P 500. The idea is to use the stock market's long-term growth performance to your advantage. This is an easy thing to do, but it takes time -- roughly 10 years, assuming the stock market's behavior doesn't change dramatically.
There are some cautions here, as you might expect. First, the 10-year time frame is not guaranteed. The stock market can be unpredictable, so your doubling time could be five years or 15.
Second, you must stay invested. Moving in and out of the market generally hinders your performance, especially if you're trying to capitalize on market cycles.
The simplest way to invest in the S&P 500 is via a low-fee ETF like the iShares S&P 500 Index (IVV 0.56%) or the Vanguard S&P 500 ETF (VOO 0.56%).
3. Buy in a downturn
A potentially faster (but less predictable) doubling strategy involves investing in a stock market downturn. You'd only implement this strategy if you're confident that market corrections are temporary (as they've always been historically).
Buying in a downturn gets you into a stock for a lower-than-normal share price. The lower cost basis, in turn, creates a lower doubling threshold. Plus, depending on the factors causing the downturn, there is the potential for steep recovery gains as investors regain confidence.
The risk here is that you can't predict the timing of the recovery. It might be fast, like the recovery following the coronavirus crash of 2020. Or the recovery might be slow and painful, as it was after the Great Recession.
4. Speculate and find great stocks
You could also invest in the "next big thing" and double your money quickly. For example, you could have bought shares of Block (SQ 0.18%) in 2020 for about $50 apiece. Today, Block shares trade above $100 -- after eclipsing $250 in 2021.
Etsy (ETSY 0.08%) is another example. In 2020, Etsy dipped into the high $30s per share. Etsy subsequently rose to nearly $300 per share and now trades around $130.
As you can see from the numbers, high-growth stocks can be volatile. Sure, many investors doubled their money on Block and Etsy. But some who bought later halved their money on the very same stocks. That's the risk you take when looking for quick wins. To be successful, you must be right about both the company and your timing.
Fortunately, there are ways to manage the risk. One strategy is to limit your speculative buys to 3% or 5% of your portfolio. You could also invest in a diversified, high-growth fund instead of individual stocks. That way, you won't live or die by one company's fate.
Diversify your doubling efforts
You don't have to live or die by one doubling strategy either. Why not combine strategies? You could simultaneously earn your full employer match, buy and hold an S&P 500 index fund, ramp up your investments in downturns, and speculate lightly in stocks or funds with high growth potential.
That mix of lower- and higher-risk efforts could be your winning strategy over time.
