As a child, a popular distraction for me was trying to fold a piece of paper over more than seven times. Each move doubled the thickness of the paper. Within a few moves, it was hard to do as the wad had grown so thick. If I could invest in some FTSE 100 shares that doubled my money in this way, even a fairly modest sum like £1,000 could grow into a much more substantial amount over time.
Here’s how I would invest £1,000 right now to aim to double my money.
Income reinvestment with FTSE 100 shares
One approach to doubling my money would be choose a high yielding share and bank the dividends.
I explained how such an approach might work in an article focused on tobacco producer Imperial Brands. But there are other high-yielding shares that I think could help me double my money if I’m patient.
For example, FTSE 100 share M&G is currently yielding 9%. That means in the first year of holding the financial services company, I would expect £90 of dividends from my £1k investment. At that rate, I would be on track to double my money from the dividends after 11 or 12 years. If I reinvested the dividends as I went, so that they also earned a high yield, I might get there sooner.
However, this might not work out. For example, M&G may decide to lower its dividend rate, or it could cut its altogether. Twelve years is a long time in which the financial services market could be affected by all manner of changes, from fintechs eating into profitability to another financial crisis.
To double my money, I’d also need my original stake to maintain its value. Over time, the share price could grow, but if it fell back, I might not double my money overall even with 12 years’ worth of dividends.
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Instead of focusing on income I could seek to double my money by investing in shares I think are underpriced relative to their future growth prospects.
Doubling might sound unlikely, but share price movement means it can happen to a wide range of shares over time. In January I identified five UK shares I thought could double this year. One of them, Card Factory, went up 75% in the next several months. Over the past year, it has done even better, more than doubling.
But one reason Card Factory has moved a lot is because analysts are so split on its prospects. With high street retail in decline, the future for a chain of card shops could be challenging. If I only had £1,000 to invest, I think I would prefer a company whose future prospects seemed more promising. That is why, instead of smaller companies like Card Factory, I would be more attracted by FTSE 100 shares.
Blue-chip growth and income
I would be tempted to search for growth and income as a way to double my money. Imperial could yet cut its dividend as smoking declines, for example. But meanwhile I’d bank any future dividends.
If tobacco stocks come back into fashion, the share price could rise. The FTSE 100 shares are already up 17% over the past year. By putting £1,000 in now with a 9% yield, I’d hope to double my money in 11 years or so. But if the share price keeps growing, it could be sooner.
The post How I’d invest £1,000 in FTSE 100 shares now to try to double my money appeared first on The Motley Fool UK.
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christopherruane owns shares of Imperial Brands. The Motley Fool UK has recommended Card Factory and Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2021