7 Quick Ways to Make Money Investing $1,000

Time Horizon and Risk Tolerance

Your investing time horizon is an extremely important determinant of the amount of investment risk you can handle and is generally dependent on your age and investment objectives. For example, a young professional likely has a long investment horizon, so they can take on a significant amount of risk because time is on their side when it comes to bouncing back from any losses. But what if they’re saving to buy a house within the next year? In that case, their risk tolerance will be low because they cannot afford to lose much capital in the event of a sudden market correction, which would jeopardize their primary investment objective of buying a house.

Likewise, conventional investing strategy suggests that people in or near retirement should have their funds deployed in "safe" investments like bonds and bank deposits, but in an era of extremely low interest rates, that strategy carries its own risk, mainly of the loss of purchasing power through inflation. In addition, a retired individual in their 60s with a decent pension and no mortgage or other liabilities would probably have a reasonable amount of risk tolerance.

Let’s now turn to the “time and risk” attributes of an investment itself. An investment that has the potential to double your money in a year or two is undoubtedly more exciting than one that may do so in 20 years. The issue here is that an exciting, high-growth investment will almost certainly be far more volatile than a staid, “Steady Eddy” type of investment. The higher the volatility of an investment, the riskier it is. This increased volatility or risk is the price an investor pays for the allure of higher returns.

The Risk-Return Tradeoff The risk-return tradeoff refers to the fact that there is a strong positive correlation between risk and return. The higher the expected returns from an investment, the greater the risk; the lower the expected returns, the lower the risk.

How long does it take to double one's money?

The Rule of 72 is a well-known shortcut for calculating how long it will take for an investment to double if its growth compounds annually. Just divide 72 by your expected annual rate of return. The result is the number of years it will take to double your money.

When dealing with low rates of return, the Rule of 72 provides a fairly accurate estimate of doubling time. However, that estimate gets less precise at very high return rates, as can be seen in the chart below, which compares the estimates for “time to double” (in years) generated by the Rule of 72 and the actual number of years it would take for an investment to double in value.

Rate of Return Rule of 72 Actual no. of Years Difference (no.) of Years 2% 36.0 35.0 1.0 3% 24.0 23.5 0.5 5% 14.0 14.2 0.2 7% 10.3 10.2 0.1 9% 8.0 8.04 0.0 12% 6.0 6.1 0.1 25% 2.9 3.1 0.2 50% 1.4 1.7 0.3 72% 1.0 1.3 0.3 100% 0.7 1.0 0.3

Key Takeaways There are five key ways to double your money, ranging from a conservative strategy of investing in savings bonds to an aggressive approach that involves investing in speculative assets such as options, penny stocks, or cryptocurrencies. The classic approach of doubling your money by investing in a diversified portfolio of stocks and bonds is probably the one that is applicable to most investors.Broadly, investing to double your money can be done safely over several years, or quickly, although for those who are impatient, there’s more of a risk of losing most or all of their money. Though doubling your money is a realistic goal that most investors can strive toward, there are some caveats—be honest about your risk tolerance; don't let greed and fear have an adverse impact on your investment decisions; and be extremely wary about get-rich-quick schemes that promise you "guaranteed" sky-high results with minimal risk.One of the best ways to double your money is to take advantage of retirement and tax-advantaged accounts offered by employers, notably 401(k)s.

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What Strategy Is Best for You?

Which strategy is best for you as an owner depends entirely on the rate of return management can earn by reinvesting your money. Sometimes, paying out cash dividends is a mistake because those funds could be reinvested into the company and contribute to a higher growth rate, which would increase the value of your stock.

Other times, the company is an old, established brand that can continue to grow without significant reinvestment in expansion. In these cases, the company is more likely to use its profit to pay dividends to shareholders.

Valuable investments can choose any of these paths. Berkshire Hathaway, for example, pays out no cash dividends, while U.S. Bancorp has resolved to return more than 80% of capital to shareholders in the form of dividends and stock buybacks each year. Despite these differences, they both have the potential to be attractive holdings at the right price.

The best way to determine whether a stock is a good investment is to look at the company's asset placement and understand how it manages its money.

Safe investments may be boring, but they don’t put you at significant risk

Investing in a medical device company like DexCom — it’s in the business of helping people with diabetes — is a much safer bet over the long term. Projections from the American Diabetes Association suggest that the disease will be much more prevalent in the future — the number of diabetes patients in the U.S. in 2000, approximately 11 million, is expected to nearly double to 20 million in 2025. And in 2050 there could be as many as 29 million Americans living with the disease.

DexCom and its continuous glucose monitoring systems help people stay on top of their glucose levels, and demand for these products will remain strong for the foreseeable future; there isn’t much guessing or speculation involved with the business. And while that safety isn’t particularly exciting to speculators, investors who are looking to truly make money from the stock market should unquestionably pick DexCom over Ocugen.

Similarly, you could buy an ETF like the iShares U.S. Healthcare ETF, which holds many of the top healthcare stocks you’ll find on the markets — no, Ocugen isn’t one. Investing in a broad mix of stocks through an ETF spreads out your risk, ensuring your returns won’t be dependent on how one single holding performs. That’s what makes investing in ETFs even more of a sure thing: As long as their component stocks do well over the long term, your portfolio’s value will likely increase over time.

Top Investment with Weekly Returns

If you’re searching for investment options with weekly returns, many of the same ways to invest will apply.

Some of the most common include:

  • Investing in the stock market with Acorns
  • Investing in real estate with Fundrise
  • Investing in crypto with Gemini
  • Investing in a savings account with CIT Bank

While some of these methods might not pay out until the end of the month or whenever you sell the investment, they can still grow in value each week.

3. Reinvest Your Dividends

Many businesses pay their shareholders a dividend—a periodic payment based on their earnings.

While the small amounts you get paid in dividends may seem negligible, especially when you first start investing, they’re responsible for a large portion of the stock market’s historic growth. From September 1921 through September 2021, the S&P 500 saw average annual returns of 6.7%. When dividends were reinvested, however, that percentage jumped to almost 11%! That’s because each dividend you reinvest buys you more shares, which helps your earnings compound even faster.

That enhanced compounding is why many financial advisors recommend long-term investors reinvest their dividends rather than spending them when they receive the payments. Most brokerage companies give you the option to reinvest your dividend automatically by signing up for a dividend reinvestment program, or DRIP.

6. Trade options

When it comes to options, Tom Sosnoff at Tastyworks says, “Trade small and trade often.” What type should you trade? There are loads of vehicles, such as FOREX and stocks. The best way to make money by investing when it comes to options is to jump in at around 15 days before corporate earnings are released. What type should you buy? Money calls.

The optimal time to sell those money calls is the day before the company releases its earnings. There’s just so much excitement and anticipation around earnings that it typically drives up the price, giving you a consistent winner. But don’t hold through the earnings. That’s a gamble you don’t want to take if you’re not a seasoned investor, says John Carter from Simpler Trading.

Related: 2 Strategies for Making Money Day Trading With a Bit Less Risk

3. Trade commodities

Trading commodities like gold and silver present a rare opportunity, especially when they’re trading at the lower end of their five-year range. Metrics like that give a strong indication on where commodities might be heading. Carolyn Boroden of Fibonacci Queen says, “I have long-term support and timing in the silver markets because silver is a solid hedge on inflation. Plus, commodities like silver are tangible assets that people can hold onto.”

The fundamentals of economics drives the price of commodities. As supply dips, demand increases and prices rise. Any disruption to a supply chain has a severe impact on prices. For example, a health scare to livestock can significantly alter prices as scarcity reins free. However, livestock and meat are just one form of commodities.

Metals, energy and agriculture are other types of commodities. To invest, you can use an exchange like the London Metal Exchange or the Chicago Mercantile Exchange, as well as many others. Often, investing in commodities means investing in futures contracts. Effectively, that’s a pre-arranged agreement to buy a specific quantity at a specific price in the future. These are leveraged contracts, providing both big upside and a potential for large downside, so exercise caution.

Related: What Starbucks Teaches About Marketing Commodity Products

1. The Classic Way—Earning It Slowly

Investors who have been around for a while will remember the classic Smith Barney commercial from the 1980s in which British actor John Houseman informs viewers in his unmistakable accent that "they make money the old-fashioned way—they earn it."

When it comes to the most traditional way of doubling your money, that commercial is not too far from the truth. The time-tested way to double your money over a reasonable amount of time is to invest in a solid, balanced portfolio that’s diversified between blue-chip stocks and investment-grade bonds.

The S&P 500 Index—the most widely followed index of blue-chip stocks—has returned about 9.8% annually (including dividends) from 1928 to 2020, while investment-grade corporate bonds have returned 7.0% annually over this 93-year period. Thus, a classic 60/40 portfolio (60% equities, 40% bonds) would have returned about 8.7% annually during this time. Based on the Rule of 72, such a portfolio should double in about 8.3 years, and quadruple in approximately 16.5 years.

Note, however, that a significant amount of volatility generally accompanies such sterling results. Investors should brace themselves for occasional sharp drawdowns, such as the 35% plunge in the S&P 500 within a six-week period in the first quarter of 2020 as the coronavirus pandemic erupted worldwide.

In addition, very high returns compared to the historical norm may reduce the potential for future returns. For example, the S&P 500 recovered from its 2020 plunge in record time and powered its way to new record highs by year-end 2020. Although it returned a jaw-dropping total return of 100% from 2019 to 2021, such stellar returns may mean that future returns from the S&P 500 may be significantly lower.

S&P 500 Doubles in 3 Years! The S&P 500 returned a phenomenal total return of 100% in the three years from 2019 to 2021, despite plunging 35% within a six-week period in February and March of 2020. An investor who held an investment like the SPDR S&P 500 ETF (SPY) over these three years would have seen it double in value.

What about real estate?

Real estate is another traditional way to build wealth, although it is a far less attractive proposition at times like the present when housing prices in North America have surged to record levels in many regions. The prospect of rising interest rates also reduces the appeal of real estate investment.

That said, during a real estate boom, the prospect of doubling one's money proves irresistible to many investors because the huge amount of leverage provided from mortgage financing can really juice up returns. For example, a 20% down payment on an investment property worth $500,000 would require an investor to plunk down $100,000 and get a mortgage for the balance of $400,000. If the property appreciates 20% to $600,000 in the next few years, the investor now has equity worth $200,000 in it, which represents a doubling of the original $100,000 investment.

Robinhood Special Features

Robinhood also has a few special features that make it unique

Fractional Share Trading

Robinhood allows investors to buy fractional shares of a company. So, if you are dying to own Tesla but cannot afford its $500 share price, you can buy as little as 1/1000000 of a share, or $0.0005 worth of Elon Musk’s enterprise.

Crypto Trading

Robinhood Crypto enables users to buy and sell Bitcoin, Ether, Dogecoin, and other alternative coins, 24/7 and commission-free. This service is incredibly unique to Robinhood and is another distinguishing feature.

Margin Trading

Trading on the margin means you can trade on borrowed cash, but also lose more money than you invest. Margin trading is risky, and if you aren’t careful you can lose serious money. The Financial Industry Regulatory Authority requires a $2,000 minimum for margin accounts.

Sell Short

A short seller essentially bets that a stock’s price will fall. Technically, a short seller borrows shares of stock, sells them, then buys them back and returns them to the lender. If the stock price has fallen in between these two transactions, the short seller turns a profit. But if the stock instead rises, then the short seller loses.  In many ways, short selling is like day trading, meaning it’s a quite aggressive strategy. As the long-term trend of the market is strongly up, a short seller must have a compelling reason for believing that a specific stock or index will fall. Macroeconomic factors, an overvalued stock price or a deteriorating business are all reasons that might cause a stock to fall, but they are not guarantees. In a booming market, even stocks that are “overvalued” or unprofitable may continue to rise. Like day trading, short selling can be profitable, but it takes a very astute or professional trader to do so.

Earn Compound Interest

The main reason the stock market has been such a tremendous wealth generator is the effect of compound interest. While you can make short-term profits in the stock market, it’s actually a safer bet to leave your money in the market for the long term and let compound interest do its magic.  For starters, the longer you leave your money in the market, the less risk you actually take. While no one can predict what the market will do from year to year, the S&P 500 index has actually never lost money over any 20-year rolling period. That’s an amazing statistic when you think about how volatile the market can be over the short run.  If you can keep your money in the market for 10, 20 or even 30 years, your potential to build wealth is tremendous. Think about it this way: If you put $10,000 in the market and earn 10% per year, taking out your profits each year, you’ll have a net profit of $30,000 after 30 years, or three times your money. But if you instead let that money compound every year at 10%, you’ll end up with just under $200,000, or 20 times your money. This may not be the answer that those looking for a quick buck want to hear, but the best, safest way to generate real wealth in the stock market is to stay in it. More From GOBankingRates 11 Things You Should Never Buy at WalmartNominate Your Favorite Small Business To Be Featured in GOBankingRates’ 2022 Small Business SpotlightThe 1% Don’t Want You to Know About These 5 InvestmentsThe Top 10 Best Travel Hacks To Save the Most Money

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Conclusion

Robinhood makes investing in the stock market easier than ever (even closing your Robinhood account is easy!). With its sleek interface, you can buy any stock you want with just a few taps on your smartphone. 

This means it is vitally important to have a good investment strategy before you begin investing. The secret of how to make money with Robinhood is to be patient, play the long-term game, and invest in quality assets.

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