Let’s work backwards. If you calculate how much growth you want to achieve, you can then use that number to find the right risk/reward ratio for your investment(s) and maximize your chances of making this happen in a given time frame.
What you’re trying to get is a 666% ROI. Basically, you want to 6.66x your money.
Doing this in 5 years indicates an annual interest rate of 38% – that’s steep. Your effective annual rate (which includes compounding interest and tells you the average growth per year) needs to be even higher: 46.2%
Basically, your money would need to grow by half every year, in order to reach $1 million within 5 years.
That’s a lot of real estate bets that have to go in your favor, in order for this to work out.
If you give it 10 years, however, you can get away with less than half of that. As long as you get 19% a year (or an effective annual rate of 21%), you’ll reach the $1m mark in 10 years.
That’s still a tall order, but much more manageable already. Now that we know what annual growth rate you’re looking for, we can figure out the right investment tool to achieve it with the lowest level of risk.
Note: As a rule of thumb, you can divide 72 by your expected annual interest rate in order to find out how long it takes you to double your money. For example, at 8%, which is the average annual growth rate of the global stock market, you’d get 72/8 = 9, which means it takes 9 years to double your money.
Assuming you don’t want to deviate from your 10 year maximum, this instantly wipes out most of the options you’ve mentioned.
Stocks have an annual return of ~8% on average, bonds return far less, more like ~2–3% on average, because they’re less risky. Commodities aren’t just highly unstable, but also rarely move in the double digit range in any given year, so those are out too.
In terms of conservative investment tools, you’d have to go to a much higher risk level here with options or derivatives, which work with multiples of 2–3x the return you’d get from regular stocks (both in up- and downside!).
I don’t know much about real estate, but unless you’re in the US and can finance several properties with only small down payments, you won’t be able to buy more than 1–3 solid properties with that kind of money. That means you’ll have to absolutely nail those say 2 properties, because they’ll have to increase in value 20% every year, which is hard to pull off, given you only have 2 shots.
If you ask me, the risk/reward ratio is off in all of these scenarios. If you have to stick to the time frame, I think, counterintuitively, one of your best bets will be startup investing.
Why?
80% of startups fail within the first five years or so. But for the ones that don’t, growth is often sky high. Gains of 1,000% or more aren’t uncommon. Let’s say you invest $10,000 into 15 different startups. 1–3 will succeed and as an early seed investor (where $10k is a common investment) you can expect an ROI of several 100% for those that pan out.
Given the time limit, I think this is your best option. However, I strongly recommend you re-evaluate the duration of this project.
With investing, time is on your side. The more patient you are, the better results you will get.
Whatever you choose, good luck!
PS: I used this calculator to run the numbers: Compound Interest Calculator