How to Double Your Net Worth from $500,000 to $1 Million

One reader wrote about how he was able to double his net worth, from $500,000 to $1,000,000.

Doubling a net worth to $500,000 is a major financial milestone. Whether this happens in five or twenty years depends entirely on the levers of risk, time and strategy. While a net worth of $500,000 is great from the start, these strategies work for anyone looking to grow their wealth, no matter how much money they currently have.

Here is a comprehensive guide, covering the core pillars of wealth building and specific “paths” based on your personal risk profile and timeline.

This article may contain affiliate links resources that – at no cost to you – I may earn a commission if you sign up or purchase something through the affiliate link.

The Rule of 72 – Secret to Building Wealth

This calculation provides an easy way to find out how long it will take to double an investment, if you know the expected return or interest rate.

Divide the expected return by 72, and this will give you an estimate of how long it will take for your money to double. For example, with an expected annual return of 10%, it will take approximately 7.2 years for your investment to double.

Time (in years) until the investment is doubled = 72/annual return

If you invest $500,000 in an investment that yields 10% annually, you will double your money in about seven years.

The Rule of 72 illustrates the power of compound interest.

How long it takes to double your money

1. The core variables

Consider these three things before choosing an investment:

• Risk Tolerance: This is the ‘sleeping at night’ factor. High-risk paths (such as individual stocks or cryptocurrencies) can double money quickly, but can also lead to big losses. Low-risk paths (such as bonds) deliver more stable returns, but slow growth.
• Time horizon: The “Rule of 72” is the best tool here. Divide 72 by the expected annual return to see how many years it will take to double:
  • With a return of 7% (historical stock market average after inflation): ~10.3 years.
  • At a return of 10% (historical average S&P 500): ~7.2 years.
  • At a return of 4% (conservative bonds/HYSA): 18 years.
• Investment conscious: do you want to be a “passive” passenger or an “active” pilot? Passive investors should stick with index funds; active investors can look at real estate, active investment strategies or business ventures.

Your financial goals, risk tolerance and willingness to spend time educating yourself on investment strategies will determine your decision. After decades of investing, studying the investment research and the markets, the data is clear. Most active investors tend to underperform the market indices. Check out our article on the historical performance of asset classes to understand how the market indexes have performed over time.

2. Strategies to Double $500,000

Here are four different paths, ranging from conservative to aggressive.

Path A: The ‘Conservative Path’ (mainly bonds and cash)

• The Strategy: Invest the $500,000 in a conservative asset allocation of roughly 75% bonds/high yield cash and 25% broad market ETF (such as VTI or VOO) that tracks the entire US stock market, or S&P 500 or VT, Vanguard Total World Stock Index Fund ETF, which provides access to the entire world stock market within one fund.
• Potential profit: Historically 4-5% per year.
• Risks: Falling interest rates can harm capital growth in the long term.
• Timeline to $1 million: 14-18 years.

Path B: The ‘Balanced Shield’ (60/40 portfolio)

• The Strategy: 60% stocks, 40% bonds. This is for the reader with a lower risk tolerance and less interest in stock selection and portfolio management.
• Potential profits: Generally 5 to 7% per year, depending on the performance of the financial markets.
• Risks: Lower growth. Inflation risk can hinder growth as your money grows, but its purchasing power doesn’t keep pace with the cost of living. Stock market declines can also hinder how long it takes to double your money.
• Timeline to $1 million: 10-14 years.

This is the path my family has followed over the years, with asset allocation adjustments from 60% stocks/40% bonds to more aggressive 70%/30% allocations. For decades, with regular additions to our financial accounts, compounding has worked its magic.

Path C: The “Lumberjack” (Leverage in Real Estate)

• The Strategy: Instead of buying one home with cash, you can use the $500,000 as 25% down payments on four $500,000 rental properties (totaling $2 million in real estate).
• Potential winnings: You won’t just win with your €500,000; you get appreciation for the full value of $2 million. A 5% increase in your property value ($100,000) is a 20% return on your actual money. Leveraging loans to help pay for properties can quickly increase returns in a strong market.
• Risks: Leverage is a double-edged sword. If the home value drops, you still owe the full mortgage. In addition, there is ‘tenant risk’ and maintenance costs.
• Timeline to $1 million: Could take 5 years or less depending on appreciation and mortgage repayment.

Other issues to consider with this real estate strategy include finding properties that are reasonably priced and affordable. On the east and west coasts, real estate costs are sky high and it is difficult to find a rental property for $500,000. A higher mortgage interest rate also lowers your return. This type of strategy is better in areas with more affordable real estate and a strong rental market. If you can provide “sweat equity” for repairs and maintenance and have the time to manage the properties yourself, you will increase your financial potential.

Furthermore, real estate investments are less liquid than investing in the financial markets, where you can buy and sell stock and bond funds at the click of a button.

Path D: The ‘speculator’ (alternative assets)

• The strategy: allocate a portion (e.g. 10-20%) to high-growth and volatile assets such as Bitcoin, early-stage startups (Angel Investing), alternative investments or sector-specific technology stocks and riskier growth stocks and funds.
• Potential profit: 20%+ or even “10x” returns.
• Risks: Extreme. You may lose the entire principal of that portion. This should only be done with a percentage of your assets as you may risk large losses.
• Timeline to $1M: Could take 1 to 3 years (if ever).

Typically, I suggest that more aggressive investors deploy 5 to 10% of their investable assets into riskier investments. This offers the opportunity for high returns and limited losses. Some alternative investments are illiquid, so you will need to keep your capital invested for an extended period of time before realizing potential gains.

Pro tip: Keep some cash on hand, so when stocks, cryptocurrencies, alternatives and other investments take a dive, you can buy shares at bargain prices. This enables greater future growth potential.

3. Comparison table

Realize that returns are not guaranteed. We use past returns to predict the future, but future returns are unknowable. The riskier the investment, the greater the chance of excessive gains and losses.

1. Max Out Tax-Advantage Accounts: If you’re still working and have access to a 401k, 403b or IRA, make sure you contribute as much as possible. If your employer matches your 401k or 403b investment, contribute at least the amount necessary to receive the employer match.
2. Assess “The Gap”: If you want to double your money in five years, but have only a “conservative” risk tolerance, your goals and reality don’t match. You need to increase your risk tolerance or extend your timeline.
3. Minimize costs: A 1% management fee may seem small, but at $500,000 that’s $5,000 per year. Over a ten-year period, that will eat up a large portion of the compound effect.

Investing resources to increase your net worth

Recommended tools for today’s economy

• Empower: Free tracker for net worth, investment allocation and retirement projections. (I use the free tools)
• Ground Floor: Real Estate Investing with Small Minimums, Even in IRAs (I Have an Account)
• M1 Finance: Automate investing and easily rebalance with no management fees (I have an account)
• Vaulted: Invest in real gold and silver at low costs and minimum amounts.
• Free microbook: ‘Invest and grow your wealth’: Actionable advice for smarter investing

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Disclosure: Please note that this article may contain affiliate links resources that – at no cost to you – I may earn a commission if you sign up or purchase something through the affiliate link. That said, I never recommend anything that I don’t believe has value.