Ashley Revell of London had a mad itch he needed to scratch. The year was 2004. The hankering stemmed from a casual drinking conversation with a friend. Revell couldn’t let it go.
The idea, in short, required Revell to liquidate all his possessions, travel to Las Vegas, and ‘bet it all’ on one spin of the roulette wheel. Naturally, this idea was sheer lunacy…don’t do this. But it is exactly what he did.
Revell sold off all his possessions over a six month period and traveled to the Plaza Hotel and Casino in Las Vegas. Then, with his mom and dad standing behind him, and a film crew in place, Revell placed $135,300 on red at the roulette wheel one Sunday morning in April 2004.
“That spin was the most amazing moment of my life,” said Revell several years back. “It is a cliché but time did stand still. It was just complete calm because I had done all the hard work.
“Everything had all been sold. I had no possessions. I had decided whether to go red or black. There were no more decisions to make – it was a complete feeling of freedom.
“The ball sort of bobbled around and then landed in what I thought was red but it disappeared slightly from view. I looked around and, as the wheel spun back into view, there it was resting in number seven. Red.
“There were a few people watching and they erupted. They cheered and I just cheered. Somebody ran on with a bottle of champagne and everyone was celebrating. My friends and family were there going wild. I had won £153,680 [$270,600]. It was just a crazy time of complete happiness.”
You Don’t Have to Gamble
Revell, no doubt, was extraordinarily lucky. He could just have easily lost it all on this high stakes wager. Then what would he have been? He would have been an instant fool without a dollar to his name.
Regardless of the fact he won big, this is obviously a crazy way to try and double your money. Particularly because it’s possible to double your money without risking it all like Revell did. You don’t have to gamble. You don’t have to go to Las Vegas either. In fact, we recommend staying away from that place.
Rather than gambling your money, you can invest it in the stock market and grow it overtime at a small fraction of the risk. Certainly, it won’t be as thrilling as what Revell did. Often times it’ll seem as boring and slow as watching paint dry. But it is definitely more prudent, and more responsible.
Consider this, the geometric average – or the calculated average, accounting for losses – of the S&P 500 from 1965 to 2014 is 9.84 percent. To be clear, this is a long-term average return. The stock market can go down for a year or two and then take several years to get back to where you started. That’s why the stock market is not a good place to save an emergency fund.
Nonetheless, the great potential for achieving a high single digit annual percent return is what makes the stock market a good place to invest and grow savings for retirement. This is opposed to a bank savings account paying less than 1 percent.
Still, to double your money, a 100 percent return is needed not a 9.84 percent return. How will stocks get you a double?
How to Safely Double Your Money in No Time at All
“Compound interest is the eighth wonder of the world,” goes the oft attributed quote to Albert Einstein. “He who understands it, earns it. He who doesn’t, pays it.”
Although there isn’t written proof Einstein ever said this…you get the point. Compound interest is powerful. Compounded stock market returns of 9.84 percent will double a lot faster than you’d think.
To find out how fast, just follow the ‘rule of 72.’ Specifically, the ‘rule of 72’ is a basic way to calculate how long an investment takes to double at a fixed annual rate of compounded returns. Simply divide 72 by the annual rate of return you’re likely to receive, and the result is a rough estimate of the years it takes to double your money.
Thus, $100 invested at 9.84 percent will take 7.3 years (72 divided by 9.84) to turn into $200. Indeed, 7.3 years is much longer than the instant double the roulette wheel may garner. But it is also much safer.
When it comes down to it, 7 years goes by in no time at all. You will be older, the time will pass. Merely compounding returns in a low fee S&P 500 index fund will get you there with double your money. You may even be able to do a bit better – and double your money in 5 years or less – if you keep an ear to the ground and listen for new opportunities before others hear of them.
These are the types of opportunities we’re on the lookout for around here. We’ll share them with you as we come across them.
Sincerely,
MN Gordon
for Economic Prism
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