Can You Double Your Money in a Year?

Well of course you can. In any number of ways. You could bet all your cash on the toss of a coin, and if you get it right (and you are betting with an organisation that pays out) you can double your money immediately. Easy as anything.

But perhaps the better question is "Can you double your money in a year while maintaining a controlled risk?"

And the answer, cheeringly, is yes, it is possible.

The sad truth is that most of us have no real idea about how to analyse and 'price' risk. Appearances can be deceptive.

BCCI called itself a bank. So we the public, rather naturally, thought it was a bank. Turned out it wasn't a bank, (and the Bank of England knew it!). And people in the City commented afterwards 'well everyone knew that it was a bit dodgy'. Everyone in the City, maybe, but how were the public supposed to know?

Icelandic Banks - well, if you used interest rate comparison sites such as forex master levels review, you would not have seen any warnings saying "Watch out, Iceland only has a population of 320 thousand, some cod, and an infinite supply of lava, so how on earth can it be financing such a large proportion of the worlds commercial activity?"

And then there's Northern Rock - saved only by the generosity of the UK taxpayer.

Can you rely on analysis carried out by bankers?

When Robert Maxwell had his famous boating incident, he left 50 banks with huge losses. Had each and every one of these banks carried out a careful risk analysis? No. They had acted like a flock of sheep. Were the risks lending money to Robert Maxwell totally hidden? No, definitely not. Private Eye had run a continuous campaign about the Bouncing Cheque, and named the Maxwell boat the SS Pension Fund (as he had looted pension funds belonging to his employees).

Nevertheless, the banks kept lending.

So it is pretty difficult to assess risk, either doing it for yourself, or following institutions employing well remunerated 'experts'.

But the other factor that should be taken into account when assessing any risk, is what level of reward will I receive in relation to the risk I am taking?

When it comes to banking, banks have a very simple way indeed of increasing the amount deposited. A mere 1% increase in interest paid per year will place the bank at the top of a comparison chart and attract a massive inflow of capital. 1% is really nothing, when compared to risk. £100 per £10,000 deposit. Insignificant. But enough to suck(er) billions of pounds.

Some banks are based on illegal activity - such as BCCI which had a lot of deposits from unsavoury sources. Some do not understand the nature of the risks that they are taking, failing to see that long term commitments cannot automatically and inevitably always be financed by short term borrowings. Some are just led by relentlessly ambitious and greedy individuals who are indifferent to the woes of those they shred. But whatever the reason for their collective incompetence (in protecting and growing the wealth of their customers, not in their ability to foster the growth of their own wealth), the public must now surely be aware that bankers cannot be trusted to steer us all to a financially secure old age.

So instead of 'safe' deposits in a bank, how does 'gambling' sound to you?

"Very risky" is probably the thought, or "a mugs' game".

So are bookmakers and casino operators mugs, or do they have a better idea of how to calculate risk than bankers - and then do they stick to any winning formula that they have devised?

Take roulette. Pays out evens if for example, the ball lands on black. Is this a good bet? YES - BUT ONLY IF YOU ARE THE BANKER. Why? Because there are 36 numbers on the roulette table half of which are black. But there is also a 0, and if the ball lands on this, the banker takes all. So on average, one time in 37 the bank will win (the other times the chances balance out). This is what gives the bank the edge. And in Las Vegas, they double up their edge by putting another 0 on the table, and clear up 2 times in 38.

Do I want to 'gamble' at roulette? YES I DO, but only if I can be the banker (please do not follow the internet tipsters pushing the idea of doubling up on a bet - this is long term financial suicide which I go into in another article published elsewhere).

Placing your money in a bank and hoping that long term interest rates exceed long term inflation may be the biggest gamble of the lot. If you are interested in achieving higher rates of return on your capital, then you need to look outside the normal fixed rate deposit schemes, which are supposedly safe.

Are higher rate returns risk free? Of course not. But there are some available that do represent a far higher return relative to risk than the traditional 'safe' options of fixed term investment vehicles - including treasuries and gilts.