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.
To maximize your 401(k) match earnings, you should know two things:
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- Your plan’s matching formula
- Your plan’s vesting rules
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 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 …….