Link to the video: How to Double Your Money in the Stock Market
Yes, you can consistently double your money over time in the stock market. This is a goal that any investor should aim for. Today’ I’m going to show you how to do just that, and 5 ways to double your money in the stock market.
Number 1: The Time-Tested Passive Investing Way
The reliable way to double your money over a reasonable amount of time is to invest in a non-speculative portfolio the way Warren Buffet recommends – investing in an S&P 500 ETF. The top choices for these ETFs include Vanguard’s VOO and SPY. (You’ll also notice the excitement of my little red munchkin friend who will be helping us point out key parts of the video today.)
The average increase per year for the VOO and SPY ETFs is 9% and has been 15% during the past 10-year bull market, if you’re reinvesting your dividends.
Using this method will double your money, over time. How long will it take? Let’s use the famous rule of 72, for calculating how long it will take for an investment to double with compounding growth. Just divide 72 by your expected annual return rate, in this case 9. The result is that you would expect to double your original investment amount in 8 years. If the bull market continues for a 15% rate, it would take 4.8 years for your original investment amount to double!
This is Lynn, and welcome back! Now for a disclaimer, this is not financial advice, but an opinion channel only. So, let’s go and talk about how to double your money, but first if you could give this video a thumbs-up in return for my hard work getting this information to you, it would be appreciated. And, while you’re at it, subscribe!
Let’s talk about an astonishing real-life example. A male friend of mine from my investing club, has been investing every month in S&P 500 and total stock market funds like Fidelity’s zero fee FZROX, and Vanguard’s VOO and VTI since his twenties. My friend had a well-paying job in technical sales, but didn’t make a killing. But he’s always been one of the most frugal people I’ve ever known. My friend and his wife made it a game to look for the best deals on everything they purchased, and quickly paid off all their loans. They regularly went on great vacations, but figured out how to use credit card points to pay for flights and hotels.
My friend told me early on that the best investing lesson he ever learned was to never sell his Index Funds. And, during market crashes he’d double down when he could on his investment contributions, basically buying the funds’ shares on sale! Market crashes were his friend, and his monthly investment amount covered the purchase of a lot more shares during the stock market crashes of 1986, 2000, 2008, and pullback in 2020! Today, in his fifties, my friend’s investment accounts are worth over 5 million dollars! Just realize, if he could make millions investing, you can too!
But some of my viewers tell me they can’t afford investing $432 per share in an ETF like VOO. So, they stick with low-cost stocks, high risk stocks that often take 5 to 10 years or more to double your money, if they make an investor money at all. Instead, even if you buy just a fraction of a share of VOO each month through a broker like Webull. You still get to double your invested money over an average of 8 years at an average 9% annual growth rate. You can use my affiliate link for webull in the description below. And during December 2021, you get 5 free stocks from Webull just for opening a new account!
So now back to the rule of 72 and keeping your eye on the ball, investing to double your money. This rule is the easy way how to run calculations, without taking the time to complete the more complex accurate calculations.
When dealing with lower rates of return, the rule of 72 is a great predictor. This chart compares the numbers given by the rule of 72 and the exact calculated number of years it would take these investments to double in value. A 9% rate of return give you an exact 8.04 number of years to double versus the rule’s 8 years. A 25% rate of return shows the calculated number of years to double your money as 3.1 years versus the 72 rule’s estimated 2.9 years.
Notice that, although it is fairly accurate, the rule of 72 gets a little less precise as rates of return s get higher, but are still is close enough!
Number 2: Invest in a Growth ETF
Growth ETFs are designed to invest in stocks that have the potential for rapid growth, versus stocks that are undervalued, for example.
These ETFs can provide much greater returns, but they are risker than S&P 500 ETFs. The stocks held in growth ETF have a much higher volatility, investors need to expect wider swings up and down in their investment accounts’ value and often deep dips during stock market pullbacks.
My favorite growth ETF is the QQQ which has returned an average of 22.67% to investors over the past 10-years. The rule of 72 tells us that you could double your money with the QQQ in 3.17 years! But keep in mind that the average returns over the lifetime of the QQQ has been only 10%, as it was founded in 1999 just in time for the steep market crash of 2000. Be aware though that with rising interest rates beginning in 2022, investing in the QQQ could result in lower average annual returns for some time. But if you’re betting on technology stocks, or non-financial stocks, QQQ is a long-term investment to consider.
QQQ is an ETF that holds 102 stocks and tracks the Nasdaq 100 index, and it’s also the fourth-most popular ETF in the world.
The top 10 stocks in the Invesco QQQ ETF include Apple, Microsoft, Alphabet and Amazon, all with strong cash flows. What’s really great is that the QQQ ETF’s expense ratio is currently only 0.2%.
Number 3: Invest in Low-Cost ETFs
Always remember that annual fees eat into investment gains. Here again, the Rule of 72 reveals the long-term investment account damage from these costs. A fund that charges 3% in annual expense fees results in cutting an investment principal to half in about 24 years. What’s really scary is that if you are paying 12% interest on a credit card, or loan charging compound interest, the amount you owe will double in six years.
So remember to stay away from the high expense fee ETFs that charge expense ratios like .60% or even greater than 1%.
Number 4: The Speculative Way
While slow and steady works, other investors find themselves caught up in the lure of fast money through day trading, or investing in penny stocks.
Both can quickly super-shrink your investment money!
You can sink some money into a penny stock’s company that looks like the next big thing. And, yes, penny stocks can double your money in a single trading day, but lose your money even faster! Just keep in mind that the low prices of penny stocks reflect the opinion of the overall investors’ opinion of the current stock’s value. Not pretty!
When it comes to day trading, according to a 2013 University of California graduate school study of the Taiwanese stock market. The grad school studied every trade made in that market over a 14-year period. What’s really scary is that less than 1 percent of day traders made a profit. So, 99 percent lost money.
Another study by University of California economist Terrance Odean analyzed the market returns of over 66,000 U.S. households trading the U.S. stock market over a five-year period. They discovered that day traders, and frequent swing short term traders, underperformed investors who employed a buy and hold strategy. And they underperformed by about one third. The more frequently a given participant traded, the more they underperformed the stock market’s average returns.
An amusing study was that from 2013 when a London business school’s study found that simulated monkeys throwing darts at stock pages, achieved better investment results then the average day trader. So clearly, it makes much more sense to buy and hold a fund or solid mature stock!
Number 5 is: The Best Way
This is definitely not the adrenaline junky way of dropping money into your favorite stock of the day or week. But, an employer’s matching contribution in a 401(k) or other employer-sponsored retirement plan is the number 1 winner to double your money. It won’t’ give you bragging rights, but getting an automatic 50 cent employer match for every dollar you save is unbeatable! Let’s see that’s an automatic 50% return, and the rule of 72 shows that would double your money in less than 1 ½ years!
Making it even better is the fact that the money going into your plan comes right out of your paycheck before tax is taken out. Right there is a significant gain in savings amount!
If you are self-employed or your employer doesn’t have a 401(k) plan, you still can invest in a traditional IRA. You won’t get a company match, but still get to invest pre-tax money! For many that of us, that means otherwise we normally would have had 15 to 35 percent tax taken out of our paychecks before investing. This is huge!
Remember that a traditional IRA has the same immediate tax benefit as a 401K, but without the employer match. And, you can invest in a 401K and an IRA in the same year, year after year.
I always love hearing from you so please let me know your strategy to double your money. And, make sure to sign-up for our newsletter so that you can be notified before videos like this one come out. Now go here to view our video on: QQQ ETF Stock Market Crash Protection 2022.