How Do You Invest $1,000?
How do you invest $1,000? I get this question more than any other.
$1,000 USD is a nice round number. It’s a significant amount of money that is more than most people carry in their pocket. But it’s also not a huge number that is hard to obtain.
(You could assume the same for any other currency, whether it’s the pound, yen, yuan, rupee, ruble, or whatever – in terms of an equal amount.)
If you’re a new investor, or someone who is looking to start putting your extra money to work, I’ve got some harsh news for you…
Now, I encourage you to read this all the way through, as only the first half of what I’m going to say is harsh.
Before I explain everything, I also want to point something out. When new investors learn about what I’m about to say, they usually throw in the towel. They think, “Oh, I’ll never have a chance at successfully investing my money. I should quit before I even begin.”
You and I know that this is the wrong attitude to have. Everyone has to start from somewhere, no matter how daunting the task ahead looks.
So, here is the harsh news I have for you, if you’re looking to invest $1,000…
It’s not worth it.
It’s not worth investing $1,000 through traditional investing means. Whether it’s stocks, mutual funds, or some kind of financial instrument… $1,000 is just not worth it.
Let me show you why…
If you invest $1,000 at a 5% compounded annual yield, you’ll have $4,321.94 after 30 years.
If you did the same at 10%, you’ll have $17,449.40 after 30 years.
If you did the same at 20%, you’ll have $237,376.31 after 30 years.
Now, that 20% yield looks great, but you have almost a zero percent chance of achieving 20% returns every year for 30 years if you’re not a full-time investor.
As for the 5% and 10% returns… that’s not much money over 30 years.
Also, I didn’t even include the fees that you’d be charged for management and/or buying/selling charges.
Admittedly, I calculated these numbers with the assumption that you’d just invest $1,000 initially and then wouldn’t add any more. This is rare for anyone, as most people usually continue to contribute funds to their investments over the years. If you were to contribute $1,000 per month to a brokerage account, or even a couple hundred dollars, then that is a great idea.
Let me give you another example:
Let’s say you bought $100 worth of stock in a company called “ABC123.”
Now, let’s assume that you have around 5% gains every year, but you hold the stock for only two years.
In two years, your stock in company “ABC123” is worth about $110. So you made $10. But… you spent $10 to buy the stock and another $10 to sell the stock.
Really, you’re walking away with $90 on a $100 investment. That means that you actually lost money.
Now, if you bought a lot of stock in company “ABC123,” then those fees are insignificant to the overall gain.
But, when you do tiny trades, the fees seriously eat into any profits. And that’s with the assumption that you will make a profit.
So, this harsh point is that you shouldn’t waste your time trading small positions in the stock market. You’ll waste a lot of money in fees, and most importantly you’ll be wasting your time chasing tiny returns.
Now… onto the second part, that is not so harsh…
If you only have $1,000 to invest, then it probably seems like an enormous task to multiply that money.
You gotta have money to make money… right?
Wrong.
This is where YOU come into the investing equation instead of just your money.
Let me tell you about one of the first investments I did. A deal that helped me to build my wealth.
Just imagine you are me (in this situation), but change the details so you can implement a similar strategy.
So about ten years ago, just after I had graduated high school, I traveled on my own to Central America.
I had originally planned on traveling with some of my friends, but they backed out at the last minute because they were afraid. There were some serious crime issues going on at the time in a variety of countries in the region.
Anyway, I went on my own and had a freaking blast. It was the first time I had traveled outside the US on my own and I was totally in charge of where I was going.
I could explore what I wanted, eat what I wanted, and think what I wanted.
Keep in mind that I literally only had a couple hundred dollars for this trip. I was staying in hostels and eating the cheapest food I could find.
I was hitching rides with trucks full of chickens and cows, just so I didn’t have to pay for taxis or buses. It was an absolute adventure.
In one of the major cities I visited, I was blown away. It was Panama City, Panama. At the time, there were cranes everywhere. High rises were going up left and right and the entire city seemed like a huge construction zone (It’s still a little like that today!).
There were apartments for sale for $70,000 USD. I remember thinking to myself, “Hmmm this city is clearly on the uprise, but where the hell am I going to find $70,000?!”
Remember, I only had a couple hundred dollars… so how was I going to get $70,000?!
This is one of those times where something seems completely unobtainable. I mean, it wasn’t even in the realm of being a possibility.
But still, I couldn’t not think about buying one of those apartments. I just had this gut feeling that it’d be a great investment. Plus, I liked the city and country because I felt it had a bright future.
Fast-forward a couple years and I went back to Panama City, Panama. It was still booming and prices were much higher. Probably double what I had originally seen on my first trip. But, I still thought there was opportunity.
However, I still didn’t have enough money. I had a couple thousand dollars, but nothing close to enough to buy one of those apartments.
This time, I thought, I was NOT going to let this opportunity pass me by. I had already seen the transformation (and price appreciation) since the last time I was there. I was not going to let it happen again!
So, being a little more mature this second time around, I figured out that I needed to use other people’s money. (This is called OPM, other people’s money.)
I made an investment presentation. I had no idea how to properly present an investment to other people, so I basically wrote a report with facts, pictures, and the investment potential. Afterwards, I learned that this was basically an ‘investment deck.’
I gave this presentation to a bunch of my friends… and they bit. They understood what I was showing them and decided it was a great investment.
I ended up purchasing a small piece of land (with mostly other people’s money) in a great area. A couple of years later, I sold the land and returned that money – plus some – to the investors. I also kept a healthy profit for myself, for the work I did.
Now, this was a relatively small deal, but it allowed me to launch into the next project that I wanted to pursue.
Since then, I have done this repeatedly, making more and more each time.
This all sounds simple… right…?
Obviously, this is a lot of work. You gotta put in a serious amount of time to not only discover a ‘deal,’ but also market it, and then get the money to fund it. Then you have to watch the investment all the way through and ensure that investors get their money back.
There are also a ton of tiny details in between, but it seems way more daunting than it actually is. You’ll need help along the way, but mostly you just need hard work and stubbornness.
You need to be extremely stubborn. Seriously.
Most people think building wealth is a lot about investing and buying the right stocks. While this can certainly help, the reality is that the big money is made through deals that you make yourself.
Here is the equation:
YOUR GENIUS IDEA/OPPORTUNITY + OPM + YOUR HARD WORK = WEALTH
This concept is exciting to me. To think that the reason that I will be successful is because of my stubbornness.
It doesn’t matter if I’m tall, short, fat, skinny, or have a below average IQ. All that matters is that I stick to a goal and relentlessly pursue the goal until I achieve success.
Now, plug yourself into this story and just change the details. Find an opportunity, do all of the hard work (while spending a minimal amount of money) and profit from your hustle.
Don’t have an opportunity? That’s Ok. You’ll find one. And if you need help, I’ve got a lot more coming in the near future.
