How to Invest $1,000 Dollars (best returns in less than a year?)

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Investing money is, perhaps, more important than earning it. It is becoming increasingly important to understand the different ways in which you can grow your money, and it is never too early to start. The two important parameters you have to set for yourself are how much to invest and for how long.

If you are considering investing a sum amounting to $1,000, you will probably think about how it can yield faster returns. Keep this in mind, however. If the money comes in fast, it will probably leave you even faster. So, how do you narrow in on on the most suitable investment option to satisfy your needs?

The financial sector offers plenty of solutions for modern-day investors, regardless of the amount they want to put in. You can create and diversify your portfolio based on the time frame you are planning to invest. It is important to follow the advice of experts in the field of finance, since they can help you safeguard your investments and make them profitable.

Ways to Invest $1,000 Dollars

You do not need to have a “minimum amount” to start saving money. With every day, saving and investing money will make you more financially stable. In this article, we will explore a few investment techniques you may want to consider; they could potentially give you a great additional income in the future.

Trade in the Stock Market

Even if you are not an active participant in the stock market, it is important to be aware of its dynamics. Here’s a little introduction:

The stock market enables companies to borrow from the public by giving them an opportunity to become shareholders. This investment from the public gives the company enough financial backing to carry out their activities and increase their sales. This rise in profit is reflected in the dividends paid to the shareholders.

Today, the stock market runs on electronic exchange modes and not their typical bids. Thanks to this move, the stock market is now able to reach even those who are not looking to make a career this way.

The best technological offering has been the high-frequency trading feature. This feature allows multiple transactions to be completed within a few seconds. It uses automatic trading platforms with set algorithms to process huge orders from multiple locations.

A lot of people are afraid invest in the stock market as they perceive it to be a risky option. However, that is not necessarily the case. The stock market does pose a risk factor, just like every other investment option. The key is to study the market well in advance and learn to track its movements before you decide to put in your money.

You can trade in the general market or invest in penny stocks depending on your investment decisions. To reduce potential risks, it is a good idea to trade stocks listed on the S&P 500, Dow Jones or Russell 2000 Index. Taking help from stock market experts will also help you plan your investment before you start buying stocks.

Deal in Commodities

This option is a lot easier to understand as it does not require any kind of expertise in finance. Commodities are products used by everyone worldwide. While some commodities are produced locally, many others like crude oil and metals might be imported.

This market opened up even before stock and bond trading was introduced. In the past, different kingdoms adopted trade so that they could receive what was not available within their own province. They were also exporting commodities and earning a handsome profit. We have adequate proof of the various trade routes established just to make the exchange of goods possible. It was possible to measure the strength of a kingdom based on the strength of their trading patterns.

The commodity market operates on the simple principle of supply and demand. Lower the supply, greater is the demand and vice-versa. Trading commodities on futures is a popular option explored by speculators and commercial users.

This market provides trading options under four categories – metals, energy, livestock/meat and agricultural commodities. Metal commodities include valuables like gold, copper, silver and platinum. Energy includes all commodities related to crude oil, natural gas, gasoline and heating oil.

Livestock and meat include many different options; live and feeder cattle, pork bellies and lean hogs. Agricultural commodities comprise food grains like wheat, corn, rice and soybean along with cash crops such as cotton, indigo and cocoa.

Another way to invest in commodities is through stock options. They require a smaller investment when compared to buying the stocks of a company directly. Since these stocks have liquidity, you don’t run too high a risk of losing your money. Trading in commodities is easier and does not demand any additional trading requirements. To help you make an informed decision, you will have access to information about any given company (including its financials).

Explore the Cryptocurrency Option

Cryptocurrency is gaining worldwide popularity today, as it offers unique ways to invest money for higher returns. As if the traditional market instruments were low on options, cryptocurrency is a digital currency that is meant to be anonymous and secure.

Since it is not issued by any central authority of government, it remains immune to all forts of interference. This is what makes cryptocurrency especially lucrative to investors. The best-known form of cryptocurrency in the market today is Bitcoin. The success story of Bitcoin has encouraged a number of other cryptocurrencies like Litecoin, PPCoin and Namecoin.

Bitcoin uses blockchain technology to store an online ledger of all transaction activities. The information is recorded meticulously and poses no risk or threat from hackers. However, since they exist only virtually, a simple computer crash can wipe out all your cryptocurrency balance!

Buy Certificates of Deposit

If you are looking to invest in a low-risk option, buying certificates of deposits (CDs) are your best bet. These are savings certificates which have a fixed maturity date and an interest rate. Certificates of deposit are issued by commercial banks and the FDIC provides insurance of up to $250,000 per individual.

A certificate of deposit is not a physical certificate; it is an account set up with predetermined terms. These include the rate of interest, maturity period and the amount of deposit. The time frame of a certificate of deposit is generally divided and offered as a three-month, six-month, annual and five-year plan.

A certificate of deposit is available electronically and can be renewed automatically once it completes a given term. If you decide to renew it, your total investment would be a sum of your principal amount invested along with the interest earned during the course of your investment. You also have the option to withdraw your investment before it reaches maturity. In this case, you will receive a refund on your principal amount but you may have to pay a penalty on your interest.

Investing in more than one bank is also a good option as it offers you a better insurance amount. This is beneficial in case you need to invest an amount surpassing the regulated limit of $250,000. Gauging the popularity of certificates of deposit, investors today can benefit from modern practices that come with a range of features and techniques.

You also have an option to not reinvest your certificate of deposit once the interest is calculated. You can opt to receive regular interest payments from your bank and create a steady source of income. However, this method could cut down your earning potential as you lose the benefit of a compounding interest rate.

Practice in Futures and Options

Futures and options are two of the most commonly traded derivatives. A future contract relates to an agreement between a buyer and a seller to deal in a particular asset at a specific time in the future. This arrangement does not require immediate cash, which makes it a lucrative option to earn greater profits.

An option gives the buyer all the rights while the obligations have to be fulfilled by the seller. At a given point, a buyer can decide whether to call or put while the seller is required to comply with the information provided.

Trading in futures is a high-risk, high-return arrangement. While you can earn a huge amount of profit, you can also multiply your losses rapidly if you do not remain informed and attentive. Options, on the other hand, give you the power to control your losses while maximizing the gains!

Invest in Real Estate

It is no secret that the U.S. is a very popular country to live in. Every year, it welcomes thousands of students, visitors and working professionals. As people migrate here every year, America’s real estate is seeing an ever-increasing demand for more houses and apartments for sale and rent.

The United States economy grew by 2.3% in 2017. This growth was a result of high consumer spending coupled with a rise in household wealth, tax cuts and house prices. Around this time, the U.S. also saw a rise in construction activities.

Going by these numbers, it is clear that the real estate sector is a good option to invest your money. The problem, however, is that many investors are unaware of the techniques surrounding real estate investment. The simplest and most popular way to get started is by renting out property. And if you think this option does not apply to you since you are not a property-owner, think again!

Popular referred to as house hacking, this option best suits those who live in a bigger home than they need. For instance, if you live in a rented three-bedroom apartment, you can stay in one room and rent out the other two. This rent gives you a little extra income every month.

If you own a large property, you are in luck; you don’t need to invest any more money in acquiring an additional house to rent out. You can just put up a part of your house and earn a handsome amount in rent every month. What could be better?

Another way to receive good returns on your investment would be to buy a property which does not seem to be in good shape. You can work on the interiors and overall aesthetic appeal and sell it off at a higher price. Buyers would be more willing to pay for a well-maintained property as this would save them the trouble of working on the interiors themselves. By buying up a shabby property and “flipping” it, you will save your prospective tenants both time and effort.

You can also utilize the services of a crowdfunding company to get connected to real estate developers. You can opt to fund real estate projects either by debt or through equity, depending on the proposition you find profitable.

Real Estate Investment Trusts (REITs) allow you to invest without having to buy any physical property. However, this option comes with its set of disadvantages. The primary drawback here is that it requires you to invest a large amount to be able to see sufficient returns.

Mutual Fund Investment

If you want to mitigate your losses, it is important to build a diversified portfolio. Mutual funds are a great way to balance the distribution of your money and prevent too much exposure in a limited area of the market. At the same time, just because a fund has performed well in the past, it does not mean that it will continue to do so in the future.

A mutual fund is a safe option as it pools money from various investors and invests the sum on their behalf. The performance of these funds is monitored by the companies that issue them on the behalf of its customers. Mutual funds enable investors to spread their capital over various investment options like debt, equity and bonds. As a subscriber, you also become one of the shareholders of the company in which a part of your money has been invested.

Investing in a mutual fund has made people more confident of the method in which they diversify their portfolios. People who are generally apprehensive about putting money in the stock market or in commodities can invest in a mutual fund. The expertise of financial advisors helps reduce the risk of losses on your investments.

Mutual funds provide a better rate of return than traditional banking instruments if you invest your money for a longer period of time. This aggregates the returns that you may or may not have earned on your money in the near future. There has been an increased amount of awareness about mutual funds only recently, since people have started learning about them from their retirement plans – like the 401(k).

You can buy mutual funds from the companies directly if you have had the chance to study the various options in detail. This would make you the right person to choose where you wish to put your money. Another option would be to set up a brokerage account with a company and buy mutual funds from another. This option may require you to bear some additional expenses. A third option would be to buy funds from a financial planner.

Buy Bonds

Bonds are an excellent way of playing it safe when it comes to your money. Bonds are a form of debt security used for raising money from investors. They may be issued by governments, corporations or municipalities. You get to earn an interest on your purchased bonds.

The thematic explanation pertaining to bonds is very simple. When you buy bonds from a particular entity, it means that you are lending to the issuer. The issuer, in turn, promises to pay you a fixed rate of interest periodically in the duration of the term. Bonds generally earn you interest on a half-yearly basis. Once the term is over, the principal amount you invested is also returned to you.

Bonds are of different types, and each variant earns you a different rate of return. This is a good tool to divide your capital bonds issued by various entities so that you can earn additional interest instead of putting all your eggs in one basket. The maturity period of these bonds will vary too, giving you timely payouts until they reach their maturity.

Three types of bonds are particularly well-known in the market today – corporate bonds, high-yield bonds and municipal bonds. Corporate bonds are issued by public and private organizations and are considered to be a great option to invest in debt securities.

High-yield bonds can pay you a greater rate of interest when compared to other bonds. This is mainly due to its high rate of default when compared to corporate and municipal bonds. These bonds have a lower credit rating than its other variants and are the reason why they pay out higher returns.

Municipal bonds are issued by national bodies like states, countries and municipalities to raise cash for funding. This money is used for social purposes like improving the existing infrastructure and providing additional educational facilities. These bonds are tax-free, which automatically makes them very lucrative for people who fall under a high-income tax bracket.

While bonds seem like the best option overall to invest your money, you should also be aware of the risks they can pose. A credit risk is ever-present as the borrower may not be able to pay you a timely interest or return your principal amount. Interest rates keep on changing with time. If you sell your bonds before maturity, chances are that you may have to incur a loss due to lower interest rates prevalent at that time.

Another possibility is that the issuer may recall the bond before its actual maturity period. This may happen if the interest rates fall as it would give them the opportunity of paying their investors less. Bonds are also not too good with liquidity as the possibility of selling them is almost non-existent.

Pick up Index Funds

Warren Buffett had once remarked that investing in index funds is a safe haven for retirement. Index funds are a type of mutual funds that make money based on the performance of a specific market index. They represent a particular segment of the market such as stocks and bonds. These funds stick to specific rules and regulations irrespective of the market performance.

Dow Jones and Standard & Poors are examples of a few well-known companies that develop market indices. All the securities in a particular index fund will be held in the same proportion as that of the index. This makes it quite easy to categorize them as mutual funds, unit investment trusts or exchange-traded funds.

Investing in an index fund is synonymous with investing passively. Index funds do not require a high management expense ratio which makes it wise to make it a core portfolio holding element in retirement accounts and 401(k) accounts.

Actively managed funds have a higher expense ratio, which is automatically charged to the accounts of shareholders. An index fund operates on a lower expense ratio which means that shareholders can get a better return on their investment.

There is, however, no guarantee that you will not lose money on index funds. An index fund mirrors the performance of a given index. It will shoot up during a bullish phase in the market and dip down when there is a bearish trend. The key factor is to understand that sufficient profits will be generated only in the long run. A short-term investment will not give you higher returns unless you have invested in a high-risk method, which is again a source of concern.

Become a Lender

Lending money to gain a considerable amount of interest is an age-old practice. In the past, this option was only available to people who had access to a large sum of money. Today, this opportunity is available to one and all, since not all borrowers are necessarily looking for a huge wad of cash.

Loans have become an integral part of the banking business as people need money to buy a house, establish a business or own a vehicle. The amount of money required in this process is large and hence only banks and other institutions with a large amount of unutilized cash were in a position to lend the money.

With time, the needs of consumers have changed. It is not necessary that those who borrow money are doing it exclusively to fulfil the broader obligations of life. Peer-to-peer lending has become a popular option today, with borrowers looking to avoid the middleman and get established with the lender personally.

Lending money to create an earning potential is a serious business opportunity. However, you must also be aware of how to lend and whom to lend to. If you are not able to manage the different kinds of dynamics at play here, you stand to lose more money.

To begin with, the borrower and lender should enter a loan agreement. This gives both parties some tangible proof that such an arrangement exists. A specific rate of return, too, should be discussed in advance and put on paper to maintain transparent communication between you and your client.

Factors such as the frequency of payment, late payment penalties and an origination fee should be considered well in advance, keeping the amount of money you are willing to lend. It would be ideal to decide on these factors once you have worked out the percentage of profit you wish to earn from the deal.

It would also be beneficial to stay aware of the legal formalities you may require to stick to once you have lent the money. These come in handy during unpleasant situations like the borrower not being able to repay your money.

Save More to Earn More

Unfortunately, there is no foolproof way by which you can earn money and increase your profits. While there are many different ways to earn money, creating a steady source of income to meet your financial needs is the most important. This requires a lot of background preparation in terms of being financially aware and learning the nitty-gritties of the option you are looking to adapt.

Do not forget to keep yourself updated with the laws that govern your money-making strategy. Embracing a new method of making money might seem risky and odd at first but once you get comfortable with the basics and experience the value of your investment personally, things will get easier to run and manage. A great way to keep earning is to learn how to save first. Greater savings will lead to increased investments, which in turn will help you get better returns on your money!

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