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How to Invest Small Amounts of Money Wisely

Note that this article assumes that you’re looking to grow your money over time and are willing to take some risk rather than just saving your money in no-risk, low-yield savings accounts and CDs. It is also assumed that you already have an emergency fund set aside that includes enough money to cover normal living expenses for six months should your income end suddenly. It is further assumed that you have no high-interest debt, such as credit cards. You would be further ahead paying off such debt rather than investing your money (because there are virtually no investments that would pay you as much interest as you would typically spend in carrying high-interest loans and other debt).

Being disciplined

Pay yourself first. Set aside as much of each paycheck as you can for investing, no less than 10 percent of your income. Do this even if you can devote only a few dollars at first. Even $5 per week will add up over time. Try to cut your costs of living. Don’t deprive yourself of necessities, but try to cut out luxuries, anything you don’t have to have. Some of the wealthiest people in the world lived frugally when they first became serious about accumulating wealth.
If your employer offers direct deposit, consider sending a portion of each paycheck directly to your savings or investment account. If you never see that money, you won’t be tempted to spend it.

Discipline yourself to build up your emergency fund to six months’ worth of living expenses. You should also pay off any high-interest debt (at least 10 percent APR) you’re carrying. This is especially important in the likely event that the interest rate you’re paying on such debt exceeds the interest rate you could expect to earn with your investments. See how to decide whether to invest or pay off debt for more information.
If the interest payment on your debt is higher than what you’d be making with an investment, it’s probably not wise to invest at first. In this case, try to pay off all your debt before investing your surplus; that way investing will actually make you money instead of merely underwriting your monthly debt payment.

Learning about what’s available for investing in
Before you invest, educate yourself. You need to understand what investment options you have, how to read financial statements, how to analyze stocks (for quality, valuations, financial strength, growth potential, etc), as well as how to avoid investment scams and pitfalls, and where to find information.
Warren Buffett, one of the most successful investors ever, had read every investment book he could lay his hands on (at least 100 books by his count) before he turned twenty.

5 Ways To Double Your Investment

There’s something about the idea of doubling one’s money on an investment that intrigues most investors. It’s a badge of honor dragged out at cocktail parties, a promise made by over-zealous advisors, and a headline that frequents the cover of some of the most popular personal finance magazines. Where this fixation comes from is anyone’s guess.

Perhaps it comes from deep in our investor psychology – that risk-taking part of us that loves the quick buck. Or maybe it’s simply the aesthetic side of us that prefers round numbers – saying you’re “up 97%” doesn’t quite roll off the tongue like “I doubled my money.” Fortunately, doubling your money is both a realistic goal that investors should always be moving toward, as well as something that can lure many people into impulsive investing mistakes. Here we look at the right and wrong way to invest for big returns.

The Classic Way – Earn It Slowly

​Investors who have been around for a while will remember the classic Smith Barney commercial from the 1980s, where 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’s not too far from reality.

Perhaps the most tested way to double your money over a reasonable amount of time is too invest in a solid, non-speculative portfolio that’s diversified between blue-chip stocks and investment grade bonds. While that portfolio won’t double in a year, it almost surely will eventually, thanks to the old rule of 72.

The rule of 72 is a famous shortcut for calculating how long it will take for an investment to double if its growth compounds on itself. According to the rule of 72, you divide your expected annual rate of return into 72, and that tells you how many years it takes you to double your money.

SEE: What Is The Rule Of 72?

Considering that large, blue-chip stocks have returned roughly 10% over the last 100 years and investment grade bonds have returned roughly 6%, a portfolio that is divided evenly between the two should return about 8%. Dividing that expected return (8%) into 72 gives a portfolio that should double every nine years. That’s not too shabby when you consider that it will quadruple after 18 years.

The Contrarian Way – Blood in the Streets

​Even straight-laced, even-keeled investors know that there comes a time when you must buy – not because everyone is getting in on a good thing, but because everyone is getting out. Just like great athletes go through slumps when many fans turn their backs, the stock prices of otherwise great companies occasionally go through slumps because fickle investors head for the hills.

As Baron Rothschild (and Sir John Templeton) once said, smart investors “buy when there is blood in the streets, even if the blood is their own.” Of course, these famous financiers weren’t arguing that you buy garbage. Rather, they are arguing that there are times when good investments become oversold, which presents a buying opportunity for brave investors who have done their homework.

Perhaps the most classic barometers used to gauge when a stock may be oversold is the price-to-earnings ratio and the book value for a company. Both of these measures have fairly well-established historical norms for both the broad markets and for specific industries. When companies slip well below these historical averages for superficial or systemic reasons, smart investors will smell an opportunity to double their money.

The Safe Way

​Just like how the fast lane and the slow lane on the freeway eventually lead to the same place, there are both quick and slow ways to double your money. So for those investors who are afraid of wrapping their portfolio around a telephone pole, bonds may provide a significantly less precarious journey to the same destination.

Treasury Notes

Uncle Sam wants you…to invest! Putting your money into a U.S. Treasury note is one of the safest of all possible investments because the interest and principal are guaranteed by the “full faith and credit” of the U.S. government.

Of course, as you know, the safer the investment, the lower the return. So putting your money into any particular Treasury bond may not beat inflation. However, experts claim that ten-year Treasury notes (also known as T-notes) are about to see an interest rate increase in 2014.

If you want in on this, remember that T-notes mature in anywhere from two to ten years. Depending on the date of maturity, the minimum investment is $1,000 to $5,000.

Here’s how it works: when you invest in a T-note, you purchase the note for some amount below the face value. For instance, you might buy a $1,000 T-note for $950. You will receive a set amount of interest each year over the life of the T-note. You might collect 3% interest per year (which will be disbursed to you semi-annually), meaning you get a total of $30 per year for a ten-year T-note, and at the end of the term you will cash the note in for the full $1,000 — making your $950 investment worth $1,300 overall. It’s important to note, however, that you will owe federal taxes on your interest payments, although you won’t have to pay state or municipal taxes.

One other big plus for T-notes is the fact that there is a thriving secondary market for them, meaning that they are a pretty liquid investment.

The Top 5 Things You Should Say ‘No’ To In 2015

When I was researching my book Breakdown, Breakthrough, I interviewed an inspiring, now well-known and beloved comedienne Monique Marvez, and her words stopped me in my tracks. She shared this story (see Chapter 11 for the full account):

“When I think back my childhood, I never really seized on a specific career path that I wanted. But from when I was a little girl, I thought about being a performer of some sort, maybe a singer. I didn’t have a great childhood. It was marred by a lot of instability and insecurity. So I knew I wanted security and stability, and I wasn’t picky about how I’d accomplish that. The first major decision I made in life was not to finish college. I was studying accounting, but I found the whole thing so boring. I remember somebody said to me then that cosmetics would always be great business, so I left college and got my first job at Estée Lauder. I loved it and was good at it because it was immediate and it helped people. I did very well, working there from age 18 to 24.

Then something happened that changed my life. I had married my high school sweetheart, and after about a year and half, he ran off with another woman. I wasn’t quite 24 years old when I got divorced for the first time. That experience threw me into an odd sort of depression—I felt suddenly purposeless and empty. While I loved cosmetics, I felt it had no real value for me. I felt compelled to seek a deeper, more profound thing to do with my life, to give me the security I longed for. Being married to my high school sweetheart was the thing that had given my life meaning up until that point. I had taken the track that “nice Latin girls” take, and I had thought it was the right thing for me, but I realized I was wrong.

I then toyed with the idea of going back to school, but I knew I was a good salesperson and people liked me. So I went to a temporary employment service to help me regroup and find a way out of retail. I went into a position of underwriting medical malpractice insurance policies, and it turned out I was really good at it. But the company I worked for asked me to stop associating with a former employee who was a close personal friend, so after a period of refusing to do that, I got fired.

I was home one day watching TV, and Oprah came on. Something about seeing her show affected me deeply. I sat there for hours after and wrote this long manifesto about my life called “The End of Slavehood.” In it, I detailed for myself all that I hated about my previous work life, and the things I would never succumb to again. From that point on, I knew I needed to be independent, so I formed my own corporation, Marvez and Madison, and worked for my girlfriend’s company selling medical malpractice insurance. I continued doing this for three years, and at 27 years old I was doing well and making some very decent money. But after a while, I begin to contemplate what my life’s big picture was and wondered if this was it. I hoped not.”

As Monique discovered after “trying on” several different professional identities, being good at your work simply isn’t enough to build a happy, fulfilling life, not if the work doesn’t match who you are. What’s required for a satisfying and genuinely meaningful life is something else—discovering what you’re naturally and joyfully gifted at (in her case, comedy and performance), and stepping forward to do work that makes use of these gifts. People often realize, after following a “secure” but joyless road for years, that life will happen, and traumas emerge, including exploitation, loss, disappointment, and sudden negative shifts away from what they anticipated. Sometimes these shifts are “just life,” but more often than not they have a purpose, which is to point you—like a red neon sign in the road—to follow a more authentic, self-affirming direction, one that allows you to honor what you’ve been endowed with and use your core gifts.

I’ll never forget Monique sharing that she wrote her “manifesto” – what she will never tolerate again in her life – and how she will end “slavehood” in her life forever. I now make this one of the key steps in all my career success coaching programs, helping women get in touch with what they love, and what they hate and wish to move away from forever.

Art, Antiques, and Collectibles

Growing up my idea of a collectible was my favorite G.I. Joe: Snake Eyes.

Let me start by saying that you should never buy any piece of art or collectible unless you actually love it and enjoy it. That’s because the reason behind the creation of any artwork — from an oil painting to a Chippendale armoire to a comic book — is to speak to someone who will appreciate it. If it isn’t at least worth something to you — you may end up stuck with a piece that no one wants, even yourself.

That being said, artwork and collectibles can be a good place to invest your money, provided you’re in it for the long haul. That’s because your investment in a beautiful piece of art or rare stamp is not correlated to stock prices, unlike any investments you make in the stock market. So even if your stocks are down, the worth of your collectibles might be up. Also, individual artists and pieces can perform better than average, meaning your current investment could be worth a great deal more years down the road.

Of course, it’s important to remember that investing in such tangible assets means that your investment is not at all liquid — so you should only spend money on art that you can afford to have tied up, potentially for many years.

As with real estate, it’s important to research any art that you are interested in purchasing. Know what you are buying, and make sure you’re buying it for the right reasons.

Some good news for art and investing newbies: according to Michael Moses, retired New York University business professor and founder of Beautiful Asset Advisors, “low-priced art tends to outperform high-priced art [as an investment].”

Money management tips

NEW YORK (MONEY Magazine) – Some of these may seem like no-brainers, but all are worth a look, and a few might just change your life.
Automate your financial life
Call your mutual fund or broker to have monthly investments routed from your bank. Do the same for your monthly utility, cell-phone and cable payments. You’ll find it easier to budget, and you’ll never pay a late fee again.
Know your credit score
Order your credit score from all three major credit bureaus for $45 from Myfico.com. True, you’re entitled to free copies of your credit reports this year, but one detail will be missing: the magic number that lenders and insurers use to judge your credit-worthiness. Pay for that.
Don’t take it with you
Pass on money to your children now rather than bequeathing it. Gifts of up to $11,000 a year are tax-free. Besides, your kids and grandkids will thank you — which they can’t do if you’re dead.
Digitize the financial drudgery
Buy either Quicken or MS Money, software that will help you track your spending, see your portfolio allocations, estimate next year’s tax bill — all the tedious tasks you know you ought to do but never would unless someone made it very easy. Pick up the premium edition of either program for $70 and change at Amazon.com. You’ll spend a couple of hours on initial setup, but from then on, you’ll be amazed at what you can do with your money, once you know what you’re doing with your money.
Have a financial plan
Hire a financial planner to review your retirement and college savings plans. At www.garrettplanningnetwork.com and www.myfinancialadvice.com, you’ll find planners who work by the hour (usually $150 to $200 per). Getting on track will take eight to 10 hours up front, plus an hour or two for a yearly checkup.
Stop assuming you’re immortal
Hire a lawyer to craft a will, a durable power of attorney, a living will and a health-care proxy. It may cost $1,500 to $2,000 (more for large or complicated estates), but could save your heirs thousands in taxes and fees. Unless, of course, you live forever.

The Speculative Way

While slow and steady might work for some investors, others may find themselves falling asleep at the wheel. They crave more excitement in their portfolios and are willing to take bigger risks to earn bigger payoffs. For these folks, the fastest ways to super-size the nest egg may be the use of options, margin or penny stocks.

Stock options, such as simple puts and calls, can be used to speculate on any company’s stock. For many investors, especially those who have their finger on the pulse of a specific industry, options can turbo-charge their portfolio’s performance. Considering that each stock option potentially represents 100 shares of stock, a company’s price might only need to increase a small percentage for an investor to hit one out of the park. Be careful and be sure to do your homework; options can take away wealth just as quickly as they create it.

For those who want don’t want to learn the ins and outs of options but do want to leverage their faith (or doubt) about a certain stock, there’s the option of buying on margin or selling a stock short. Both of these methods allow investors to essentially borrow money from a brokerage house to buy or sell more shares than they actually have, which in turn can raise their potential profits substantially. This method is not for the faint-hearted because margin calls can back your available cash into a corner, and short-selling can theoretically generate infinite losses.

How to Invest Small Amounts

As a financial planner, I spend a great deal of my time advising clients on how and where to invest their money. Between bonds, mutual funds, ETFs, and even individual stocks that offer dividends, there are a huge number of options out there for investors to grow their money in the stock market.

However, the stock market can be volatile in ways that the average investor may find difficult to watch. When my clients feel jerked around by the market’s ups and downs, they’ll often ask me for advice on alternatives to investing in the stock market.

Here are nine possible investment alternatives that can also help you achieve your financial goals.

For many years, real estate was one of the most popular alternatives for investors who were skittish about the stock market. Unfortunately, it was also an investment that anyone who had watched home-flipping shows on HGTV thought they understood (including yours truly). Of course, we all know what happened in 2008 — and six years later many investors are still wary of the real estate market.

But in many markets, prices still haven’t entirely recovered from the crash, which means it’s possible for average investors to add real estate to their portfolios. In general, there are four accessible routes to real estate investment. I’ll share two that I’m familiar with and then I’ll have a legitimate real estate investor share his popular methods.

First is purchasing a rental property as an individual, and second is buying shares in a real estate investment trust (REIT).

Individually buying a rental property is pretty straightforward, but because you will have to invest money in upkeep and time into being a landlord, it’s not necessarily everyone’s cup of tea. Unless you use a management company — which will cut into your profits — you may find that being a landlord takes up too much of your time and resources.

A real estate investment trust, on the other hand, offers a less hands-on method of getting into the real estate market. A REIT (pronounced to rhyme with “treat”) works similarly to a mutual fund, except the investment is in real estate. Basically, the REIT is a group that invests in real estate properties, and allows investors to purchase shares of the REIT. These trusts receive tax benefits in exchange for paying most of their income to the shareholders. Investors can purchase shares of REITs on public exchanges, which means that the investment is pretty liquid. In addition, shares of REITs pay out regular dividends.

How to Invest Your First $1,000

The rich had to start somewhere. Forget that some wealthy people are born affluent, won a lottery or had connections – plenty of them started right where you may be now: somewhere near the inglorious bottom. So if you’ve finally scraped up some extra money, and you don’t need to divert it into debt, an emergency fund or a new washing machine, you may want to try your hand at investing.

We asked a handful of financial experts to give their suggestions for investing $1,000, a pittance for a veteran investor but a decent sum for many of us.

But before you consider any of the following ideas, remember, especially if you are a beginner, investing takes time. If you think you might need that $1,000 in a few months, adding more money to your rainy-day fund is the best thing you can do. And you should never invest anything you can’t tolerate the thought of possibly losing; after all, investing is a risk. Of course, many people will argue that you’re risking plenty if you don’t invest. So if you have an extra thousand, consider placing it into the following:

Exchange-traded funds. ETFs have been growing in popularity since they were introduced 20 years ago. Like stocks, ETFs can be bought or sold on an exchange at any time during the trading day. But similar to a mutual fund, an ETF holds a basket of assets, like tech stocks, or, more broadly, the U.S. stock market.

“They provide broad asset-class exposure and do so for a very cheap cost,” says Jake Loescher, a financial advisor at Savant Capital Management, a fee-only wealth management firm headquartered in Rockford, Ill. So while an investor with deeper pockets may want to invest in mutual funds, ETFs are fairly accessible to a beginning investor.

Mutual funds. That isn’t to say all mutual funds are off the table for someone with a grand to invest, according to Loescher. “Many of the Vanguard Target Retirement mutual funds are easy to set up, even for the unsophisticated investor, and offer this broad asset-allocation exposure at the $1,000 minimum funding standard,” Loescher says. “They also offer automatic rebalancing as the individual gets closer to retirement.”

Another thing to consider if you’re debating between a mutual fund or ETF: whether this $1,000 is a one-time investment or the start of a plan to put money away every month. If you can afford to sock away some money every month toward your retirement, a mutual fund is a good choice (and even better if you’re contributing it to an IRA or a 401(k) plan, both of which have tax advantages).

“Most mutual funds have a $1,000 minimum with $25 minimum deposits,” says David Nawrocki, a finance professor at the Villanova School of Business in Villanova, Penn.

Certificates of deposit. These are among the safest investments because they are insured by the Federal Deposit Insurance Corp. Because the United States is insuring your money, it’s impossible to lose money in a CD. But since there is virtually no risk, there isn’t much interest (many of the highest-yielding 1-year CDs currently pay under 1 percent, according to Bankrate.com). There are even some banks that offer no-penalty CDs, meaning if you need to withdraw the money early, you won’t get hit with a fee.

Peer-to-Peer Lending

One of my favorite financial benefits of the modern and innovative world is the rise of peer-to-peer lending.

This investment is just what it sounds like: you are lending money to a peer, and getting paid the interest rate. It’s beneficial for both parties — the borrower will often pay a lower interest rate than they would receive from a traditional bank, while the lender’s returns are often higher than what they could obtain through other investments.

I have personally invested through Lending Club, which, along with Prosper, are the top two peer-to-peer players out there. The thing I like most about peer-to-peer lending, especially through Lending Club, is that the money you invest is diversified.

Let’s say you invest $1,000. Of that $1,000, only $25-$50 would go to any one borrower, so if that particular borrower defaults, you don’t lose your entire investment. This is like buying stock in a mutual fund: if one of those stocks in that mutual fund goes belly up, you still have 99+ stocks in the fund still making you money.

Another great aspect of peer-to-peer lending is the low bar for entry: the minimum investment is only $25 for Lending Club.

Which peer-to-peer lender is best? I was curious myself so I started the Prosper Vs. Lending Club experiment and opened an account with each. As of now, both have been yielding me double-digit returns, and I haven’t had any defaults yet. I’ve been very pleased with the results thus far and would encourage anyone to check it out. (Note: peer-to-peer lending isn’t available in all states.)