To be successful in investing, you don’t need perfection; in fact, correcting the basics and knowing a few key details goes a long way. Perhaps the better news is that there are a number of ways to top up your investments that require very little technical knowledge of finance. Many ordinary people can double their money by making a few simple and practical choices. Below you will find four ways in which investing can double your money with minimal effort.
Contents
1. Stoic power of time
The primary concept behind investment growth is composition: Your portfolio will earn faster and faster if you add it from time to time and leave it alone. In other words, as your investments grow, they will continue to make money more simply because they have grown. The sooner you start investing, the sooner compound interest will be received.
It is also desirable reinvest dividends by the way. If the stock market happens to fall when the dividend is paid, you will add discounted shares. As a result of reinvesting in dividends, you will have more shares and you will be paid a higher dividend in the next period. This process repeats itself, continuing on, generating ever-increasing dividends and boosting the balance of your portfolio.
2. Arrange with the employer
Talk about literally doubling your money: if you invest in your own money an employer-sponsored plan (like 401 (k)) up to a certain amount, many employers will offer an appropriate contribution. The matching amount often ranges from 3% to 6% of your salary, and the definition is a 100% return: If you earn $ 100,000 a year and contribute 5% of your salary for your 401 (k), a company that matches up to 5 % will pay $ 5,000 in addition your contribution. Since this is basically “free money”, there is really no reason to miss it.
That is why it is especially important to read your own a document on the employer’s pension plan at least once know the rules around matching and how to make the most of them.
Image source: Getty Images. This may interest you : Why this financial expert has a retirement alter ego, and more money tips for single women.
3. Manage your taxes
With the threat of a possible tax increase on the horizon, knowing how to limit your tax investment is an increasingly important part of increasing your net worth. On the same subject : How Auto-IRAs Help Retirees Delay Claiming Social Security. Among the many options you have:
- Contribute to annual highs for your Roth IRA and retirement bills
- Use a health care account (HSA) as a retirement account, if you have access to it
- Retain the investment as much as you can
- Avoiding daily trading and other short-term speculation
- Ensuring that investments are held in their “tax optimized” place (i.e., stocks in taxable accounts, bonds in tax-deferred accounts)
You don’t have to be a tax expert to do any of this, but you will reap the benefits every spring if you constantly work as hard as you can.
4. Refuse to pay high fees
If you decide to hire a full-time advisor, the language around fees can sometimes be confusing. This is especially true when an annual fee of 1% to 2% doesn’t sound too much, and terms like “management fee” and “advisory fee” sound extremely official. To see also : Can College Students Get The Third Stimulus Check?. The fact is that the fees are analogous to “guaranteed negative returns”. You should be extremely careful before agreeing to pay them, unless you are completely clear about the benefits you will receive.
The reality is that simply not paying these fees and choosing a passive, long-term investment portfolio that requires a bit of continuous maintenance is a very easy way to double your money. High, unnecessary fees can, in the worst case, have the effect of adding years to your working life, by avoiding them altogether, allowing your investment to grow unencumbered.
The sooner the better
The best and most effective way to double your money is to start investing today. The magic of compound interest intensifies over long periods of time, so the sooner you start investing, the better your result will be. Be sure to correct the foundation and learn a few important details and you will be well on your way to a significant portfolio.
