#2-The “double your investment” theory

With billions of dollars changing hands every day, with every company growing and  , with every investor multiplying their wealth, the latest fad circulating in the finance industry for a long time now is “how do I double my money”.. Every individual, company and organisation is searching for industries and sectors to invest in order to grow their wealth and net worth to the highest level in the shortest time. It is very enticing to accept the extra risk just to earn more money. Even percentages have lost their charm in front of this fad. “80% growth” doesn’t roll well on the tongue as does “double your money “.

The “doubling your money” seems the best way to drive clients to invest with their company or hand over their portfolio for management.Every private financing company has been observed promoting their motto as “double your money in 6 months or 1 year or 72 months ” in order to play with the customer’s mind.

Before I get to my views on this fad, let’s get a basic assumption clear:If money could double this quick with a 100% guarantee, then the entire world would invest in the same investment vehicle. Moreover, another fact to understand is the difference between gambling and the stock market. An individual can gamble with the assumption of doubling but in real life one cannot invest with this assumption at the same pace.

Since it is clear that money doesn’t double at the same rate as gambling, but does it even double ? and if yes, in how much time and where?

From the basic there are four primary ways of growing your money:-

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1)”Go strong, Be strong”:- This refers to investing in blue chip companies or the financially strong companies. These include Reliance industries, Tata consultancy services, etc which are solid non-speculative companies. This is a literal example of “make money the old-fashioned way they earn it”. To add to this type of investing is the “old rule of 72″which says divide your expected annual rate of return by 72 and that is a clear indication of how many years it will take to double your money.Eg:blue chip companies:- Reliance , Tata, HDFC bank , Coal India

FUNFACT:- The blue chip companies record a growth of 9 to 11% with an average of 10%. Thus it takes 10 years for your money to double itself. However, in front of this dull fact lies the advantage of very low risk since these are non-speculative solid companies with limited risk or as you call it the “A” grade companies on the stock exchange.

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2)”Oppose the basics”:- This involves investing in the contrarian way. When all the investors go for the hill , the contrarian sells his stocks. When every one is selling their stocks , he wants to go out-of-the-way to buy the garbage to convert it into gold. He thinks the opposite and earns in a very irrational and risky way. There is a saying by Baron Rothschild (and Sir John Templeton) to all the  smart investors “buy when there is blood in the streets even if the blood is their own.” The way to make sure of this technique is to study  the company well and smell whether there company is being over-valued or under-valued. Eg:overvalued or undervalued stocks in the stock exchange

FUNFACT:The earnings and chances of doubling are very high because when people sell, you go out-of-the-way to invest in the stocks at an all time low and when the opposite you get the perfect high price. But based on research , it is proved that the risk taken along with the waiting period is at a significantly high level. The perfect advice would involve the use of fundamental analysis rather than a technical one to go ahead with this type.

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3)”Safety is your first priority”:- There are many investors who want to enjoy the moment of expressing their happiness by doubling but want to go the safe way. They do not want to always remain  tensed. hitched to the telephone making calls to take the long and short position. They want to have a smooth ride till they reach their destination. This involves only investment in bonds eg:- zero coupon bonds.

FUNFACT:investing in bonds makes these investors double their money at a relatively slow rate. However it fulfils their main criterion of having a safe trip to their destination. No risk , no remaining glued to the telephone , no mental pressure to buy or sell are the features of this investing technique.

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4)”The Sparkling speculation”:this technique is for those who are glued to the stock exchange and are aware of every minute detail. They have the burning fire to double their money at the cost of endless amount of risk. They speculate , trade regularly and take advantage of an inefficient market to earn profits. This section of people trade on futures and options as they are well aware of the behaviour of the market.Eg:- futures, options i.e.put and call options

FUNFACT: Quick money coming in is equivalent to Quick money going out. This is the quickest way to double your money and investment . However the risk of losing everything is a greater disadvantage. Speculation involves foreseeing the future i.e. money can bloom to double and can fall to nothing.

Thus, every investing technique has its method of doubling the money. The money has to get doubled in all circumstances due to natures rule of moving ahead towards growth and advancement. However doubling your money depends on many factors like:-

1)time 2)accuracy 3)RISK 4) conservatism 5)analysis 6) deciding the type of investment



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