THIS is how to make money with Robinhood [2022]

What is a short-term investment?

If you’re making a short-term investment, you’re often doing so because you need to have the money at a certain time. If you’re saving for a down payment on a house or a wedding, for example, the money must be at the ready. Short-term investments are those you make for less than three years.

If you have a longer time horizon – at least three to five years (and even longer is better) – you can look at investments such as stocks. Stocks offer the potential for much higher returns. The stock market has historically risen an average of 10 percent annually over long periods – but it has proven to be quite volatile. So the longer time horizon gives you the ability to ride out the ups and downs of the stock market.

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Risks With Robinhood

In general, trading on Robinhood is not more risky than trading on any other platform.

However, Robinhood’s margin trading feature is risky for the average investor. Trading with money that is not yours is very risky. If you borrow money and the share goes up, and you sell in time, you can make a big profit.

But if you borrow money and the share goes down, or you don’t sell in time, the loss you make has to be paid out of your already dwindling portfolio.

This big-risk, high-reward way of trading seems very glamorous. But remember for every boastful, leveraged winner, there are thousands of much quieter losers.

Robinhood also makes it very easy for customers to place options trades. This is another risky investment strategy that some liken to gambling.

Nathaniel Popper—a journalist for The New York Times and the author of “Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money”—wrote that Robinhood customers had “bought and sold 88 times as many risky options contracts as Schwab customers, relative to the average account size.”

Popper continued, “This kind of trading, where a few minutes can mean the difference between winning and losing, was particularly hazardous on Robinhood because the firm has experienced an unusual number of technology issues, public records show.”

Before trading on margin or placing options trades, be sure to understand how they work and your potential downside. These strategies are very risky and are not suited for most investors.

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

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

Five Ways to Double Your Money

Doubling your money is actually a realistic goal that most investors can strive toward and is not as daunting a prospect as it may seem initially for a new investor. There are a few caveats, however:

  • Be very honest with yourself (and your investment advisor, if you have one) about your risk tolerance; finding out you don't have the stomach for volatility when the market plunges 20% is the worst possible time to make this discovery and may prove very detrimental to your financial well-being.
  • Don't let the two emotions that drive most investors—greed and fear—have an adverse impact on your investment decisions.
  • Be extremely wary about get-rich-quick schemes that promise you "guaranteed" sky-high results with minimal risk, because there's no such thing. Because there are probably many more investment scams out there than there are sure bets, be suspicious whenever you're promised results that appear too good to be true. Whether it's your broker, your brother-in-law, or a late-night infomercial, take the time to make sure that someone is not using you to double their money.

Broadly speaking, there are five ways to double your money. The method you choose depends largely on your appetite for risk and your timeline for investing. You may also consider adopting a mix of these strategies to achieve your goal of doubling your money.

#8: Pay Off Debt

Paying off debt is not usually what comes to mind when you’re thinking about investing your money but the stats don’t lie. Americans’ debt load continues to increase year over year and while your mortgage rate may be low and you’ve had some of your student loans forgiven, the interest that you’re paying on your other debt is killing your ability to accumulate wealth.

Even though $1,000 may not have a significant impact on whittling down the amount of debt that you have, it’s a crucial and vital step towards achieving financial freedom. I can’t express in words what it felt like when I finally paid off my student loans and credit cards that I had recklessly accumulated in school.

I can’t put a value on how free I felt.

Taking $1,000 and applying it towards your debt get you one step closer to feeling the euphoria of being debt-free.

Day Trade

If you’re a nimble and proficient trader, probably the “easiest” way to make fast money in the stock market is to become a day trader. A day trader moves in and out of a stock rapidly within a single day, sometimes making multiple transactions in the same security on the same day. For investors with a good understanding of market trends and the ability to anticipate or decipher financial results of particular companies, money can be made in day trading. However, the average day trading investor typically loses money. In fact, anecdotal estimates suggest up to 95% of day traders lose money — and, even worse, they continue day trading. There is definitely money to be made as a day trader, but generally it’s best left to the professionals.

What s the Single Best Way to Double Your Money?

It really depends on your risk tolerance, investment time horizon, and personal preferences. A balanced approach that involves investing in a diversified portfolio of stocks and bonds works for most people. However, those with higher risk appetites might prefer dabbling in more speculative stuff like small-cap stocks or cryptocurrencies, while others may prefer to double their money through real estate investments.

#10: Beat Your Savings Account

Risk level: Medium

If you’re a buy-and-hold cryptocurrency investor with $1,000 of crypto in your account, you can use this option to earn more interest than you would in a traditional savings account. With a BlockFi Interest Account, you deposit your cryptocurrency and earn a rate of return that accrues daily and is paid out on a monthly basis.

How It Works: A BlockFi Interest Account offers up to 7.25% APY on your crypto deposits, yet the amount of interest you earn depends on the type of cryptocurrency you have. For example, Bitcoin is currently earning 4% APY, whereas the Gemini Dollar (GUSD) can net you the top rate of 7.25% APY. Note that there are no minimum deposits required to earn interest and that there are no hidden fees involved in your account.

Where to Get Started: You can head to BlockFi, which is the cryptocurrency platform that offers the BlockFi Interest Account. Open a new account and deposit your crypto, and you’ll be on your way to earning exceptional rates in no time. Note that, while interest accrues daily, you’ll only be paid interest once per month. Learn more about BlockFi.

Who It’s Best For: This type of account is best for crypto investors who planned to buy and hold already.

Pros
  • No hidden fees
  • No minimum balance to open an account or earn interest
  • Earn a better rate than you would with a traditional savings account

ConsCryptocurrency is volatile in generalInterest is only paid out monthlyYou might be charged additional fees, including fees for withdrawals from your account

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Other Circumstances to Consider When Investing

Before you start investing all of your money into the stock market, index funds, or other investment options, you should take into account some of these considerations. 

Debts

Before you invest a penny, it’s a good idea to ensure you don’t have any high-interest debts such as credit cards, personal loans, or student loans. These debts can cost you thousands of dollars over the course of a year and crush your dreams of financial freedom. What’s considered high interest? If any debts have an interest rate above 7%, it’s wise to pay off these debts before investing.

If you’re struggling with these debts, you might try to start a side hustle to earn money and use the additional cash to pay off debt and start investing.

Looking for safe investments? Check out these places to get 5% interest on your money!

Taxes

Unfortunately, the money you make from investing will be taxed. If you hold the investment for shorter than one year, your gains will be taxed as short-term capital gains, which can be significantly more than taxes on long term capital gains for investments held longer than 1 year. If you buy and sell stocks frequently, you’ll be faced with a larger tax bill at the end of the year.

Invest in Your Strengths

There are different investment opportunities that come up all of the time, but that doesn’t mean they’re for you. You should always take into account your strengths and weaknesses before making a decision about growing your money. For example, if you’re not comfortable investing in real estate, it’s okay to avoid it altogether and lean towards something more simple like the stock market.

Additional Investing Resources:

Patience is the Secret to Making Money on Robinhood

Both asset appreciation and dividend income are strategies that require patience.

The mistake many investors make on Robinhood is to get involved in day trades. Stocks go up and down daily, and if you mistime it, you can lose serious money. 

Similarly, margin trading means you are trading on borrowed cash. If your margin trade doesn’t work out, you can lose serious money.

However, the stock market, over time, tends to go up.  Increase your investment time horizon. Invest only the money that you have. Be patient and allow your money to compound over time.

Best investments for short-term money

When you need the money Investment options Potential interest rate Risk
A year or less High-yield savings and money market accounts, cash management accounts Around 0.6 percent Low risk and accounts are backed by the FDIC.
Two to three years Treasurys and bond funds, CDs 1+ percent Bank products and Treasurys are safest, corporate bond funds slightly less so.
Three to five years (or more) CDs, bonds and bond funds, and even stocks for longer periods 1.5+ percent (or much more if you’re investing in stocks) CDs and bonds are relatively low risk compared to stocks, which can fluctuate a lot and are high risk.

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.

Use Market Data to Guide Your Decisions

Market data refers to the price, bid/ask quotes, dividend per share (if applicable), market volume, and other market information. There is historical data as well as real-time data.

Whether you are more of a fundamental or analytical investor, this data is valuable. Data-driven decisions prevent impulsive and emotional purchases.

You can find some of these data points within your stock trading platform or on stock and investment websites.

Additionally, commonly-available information to you in most online brokerage accounts will show you the current share price, the 52-week range, market capitalization, volume, and more.

4. The key is to diversify

The key, experts say, is to diversify, which means have a variety of investments in different things. Don't put all of your eggs in one basket. That keeps balance, and if one investment is going down, another might be holding steady or going up.

For example, if your investments are all in tech and all of a sudden the tech sector starts sliding, so is your portfolio, Sun explained. "If you have some in tech, maybe some in health care and those more traditional companies that pay dividends," Sun said, "then your overall portfolio is a little bit better balanced."

So, try to make sure you have investments across a wide variety of sectors (such as technology, health care, retail, financial, etc.) as well as risk levels. Growth stocks, for example, can gain a lot but also lose a lot. Value stocks are more steady growth. You can also invest in currencies, commodities and riskier investments such as cryptocurrencies and NFTs. Those tend to be more volatile and complex, so you really want to do your homework — and make sure you are only investing what you can afford to lose.

It's OK to get advice from friends when investing, but you need to do your own research and you need to be diversified. If your friend says buy XYZ stock because it went up for them, don't just buy that and leave it at that. It could go down for you. So, if you're diversified, you have a cushion for that.

Can You Make Daily Returns by Investing?

Absolutely. There are many types of investments you can use to make daily returns and grow your money.

It’s important to keep your expectations realistic otherwise you’ll run the risk of getting burnt out from your investments. 

By investing in the stock market, real estate, or starting an online business you can earn money without having to work. 

Related: How to Turn 10k Into 100k

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5. Continue investing

Here's one of the biggest secrets of investing, courtesy of the Oracle of Omaha himself, Warren Buffett. You do not need to do extraordinary things to get extraordinary results. (Note: Warren Buffett is not only the most successful long-term investor of all time, but also one of the best sources of wisdom for your investment strategy.)

The most surefire way to make money in the stock market is to buy shares of great businesses at reasonable prices and hold on to the shares for as long as the businesses remain great (or until you need the money). If you do this, you'll experience some volatility along the way, but over time you'll produce excellent investment returns.

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