Good investors are always looking out for the next big investment opportunity. However, if someone came along and told you that they´d found a way to double your money then you'd probably be at least a little bit suspicious of the return on investment that they were offering.
That's how the team at Trading Education felt when we first came across this article from Investopedia. However, instead of being yet another article plugging a get rich quick scheme that has every chance of failing in the future, the team at Investopedia has put together a good reminder for all investors of the tried and tested strategies that can help a portfolio to grow.
There are a number of strategies out there and the one that's right for you will depend on the size of your portfolio and how quickly you're looking to make a return on investment for yourself. Ready to hear what options you have? Then read on.
1. Play it safe
We're going to start with the mild option. Everyone can double their money with hardly any risk if they're willing to be patient. How? Simply put your money into government bonds or a fixed interest savings account and wait.
The problem with this approach is that, in this era of incredibly low interest rates, the process of inflation may have significantly, or completely, eaten away at the value of your investment portfolio by the time that you've actually doubled your money.
While you may technically end up with twice the amount of dollars, pounds or euros that you started with, you'll probably be able to buy less with that amount of money than you were able to right back at the beginning of the process.
Nevertheless, if you're an incredibly risk-averse person and want to be sure that you're getting at least some sort of return on your money, then an interest paying account is probably a good place to start.
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2. Wait for a bloodbath
This one's a little bit more dramatic than the first and involves you getting into the market at the point where just about everyone else seems to be getting out. Choosing the correct moment here is absolutely critical. Make a mistake and you could end up costing yourself dear.
The principle here is that every market fall, be it a correction, a dip or the start of a long-term recession, eventually reverses itself. This gives everyone who bought in at the bottom of the market a fantastic opportunity to make lots of money when the price of stocks eventually rebounds. The tricky part is knowing when the bottom has actually been reached and it's safe to start working on your investment portfolio again.
The potential returns are huge if you get this right, however. Anyone who bought into the S&P 500 index at the bottom of the market during the Global Financial Crisis would have more than doubled their money by now, a significantly better return than would have been offered by any savings account or the US government bonds that many investors were trying to buy into at the time.
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3. The speculative way
This covers the potentially lucrative world of spread betting but comes with a significant risk that any investor needs to be aware of before they take on this particular opportunity. While the potential return on investment can be enormous, it is possible to lose more money than you invest in the first place by investing this way.
Spread betting essentially works by trading houses lending you money and allowing you to make bigger bets on the market than the size of your investment portfolio would traditionally allow you to do. If you're incredibly confident that you're making the right decision, this does offer a significantly larger return than normal investments.
However, the potential losses are larger as well. It's possible to lose your entire portfolio to spread betting and still end up owing the trading house money. While the old saying has it that you have to speculate to accumulate, this one is only for the certain and experienced investor.
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4. The solid way
While the team at Trading Education would never want to bore you, we do think it's worth mentioning the kind of investment portfolio that has worked for many people over the years - even if it's slightly less exciting than the options we've mentioned above.
A diversified investment portfolio, with risk spread between a number of blue-chip stocks operating across a wide variety of sectors, has traditionally been the best way to make good returns from the stock market over the medium term. The returns on offer will generally outstrip the safe haven investments of government bonds and interest paying savings account but by having a diversified approach that takes in many of the big boys of American and international business, you're at significantly less risk than you would be from the approaches we've already outlined. It also allows you to take a more passive role when it comes to your investment. You won't need to tweak your portfolio every week.
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5. The pension
This is even less exciting than the option above, but we'd be totally remiss if we didn't mention it. Most pension schemes include some level of employer contribution that literally allows you to double your money. The catch, of course, is that you won't be able to access that money for a significant number of years to come. However, if the reason you're investing is to plan for your retirement and you have access to a 401(k) or other pensions account that works like this, then it would be daft not to consider using your investment portfolio in this way.
Hopefully, one of the options we've outlined above for doubling your money appeals to you and the investment portfolio that you run. The right level of risk varies between people and we wish you luck in choosing the correct investment approach for you.
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