How To Invest When You Have $1,000 (only)?
Investing is about materializing future earnings at a multiplier. This multiplier can be 3%, 4%, 5% on top of our principal. Where should we invest to get the highest return possible? Are they different strategies for different principal amounts?
We are the only living species obsessed with investment. There are many reasons associated with that. Retirement is one. Leaving our jobs is next. Experiencing the joy of watching money growing more money could be another.
This isn’t complex calculus. This is about applying the multiplier % on top of our principal. This is what I mean.
Maybe you are interested in investing in a stock that has huge potential in this decade. It could be a Technology or plant-based food company. For purposes of simple illustration, let’s say the annual dividend yield for the stock of your choice is 3%.
Assume that 1 stock is priced at $1,000.
That means we will get a dividend of $30 by the end of the year (3% * $1,000). Depending on the company’s dividend policy, we will continue to receive dividends in years to come, even though the dividend pay-out will differ based on company performance.
If we reinvest our dividends back into the company and assuming that dividend yield is also 3% at Year 2, we would have earned $0.09 on top of the $30 from year 1 PLUS the $30 dividend declared at end of Year 2.
That means we would have grown our money pool by $60.09 at the end of Year 2.
The money game is amazing.
My question is — Are there higher yields on our money if all we can spare is $1,000 for investment?
Practically speaking, getting $30 at the end of the year doesn’t make a dent in our quality of life. or $60.09 for that matter. I don’t think it is sufficient to pay for a 1-night stay at the budget hotel.
Bonds yields and deposit account interest rates are at an all-time low too. I doubt there is 3%, to begin with.
This is my suggestion, especially when the amount we can spare is low 4 digits.
Invest in ourselves.
Yes, investing in ourselves will give us a higher return compared to the various financial instruments available to all of us.
For instance, we can invest in professional development, such as our ability to close more sales. Our commission jumps when we can close more. That could be a result of learning how to present ourselves better, presenting our value proposition better.
Imagine that the Professional Development course costs $1,000. That course allows us to 2 additional sales deals a month, earning an increment of $100 each month. We would have recovered our principal within 10 months and then continue to profit into the future.
A 12-month horizon means $200 profit ($100 a month) made on the professional course cost outlay, and profit margins are 20%. We recover our money within 10 months and made 20% on top of that.
It beats the stock market returns by a long mile.
We can also invest our money in effective written communication so we can write for a living. For one, Medium does pay its Members for contributing stories. Some of my stories continue to earn for me even though they have been written a couple of months back.
Good stories that help others with their life and work are like digital assets compounding dividends to us.
How does that work?
Assuming that we shell out $50 a year for the subscription and we are members of the Medium Partner Program. All it takes is for us to cover the initial cost of $50 and the rest of the subsequent proceeds are for the taking.
A quick scribble at the back of the napkin tells me that the monthly cost of the subscription is $4.167 ($50/12-months). When we earn $4.17 from our stories monthly, we earn.
In fact, there are many ways to earn that extra yield.
There are many ways to squeeze a higher yield when the amount we can fork out is in the low 4-digits.
We should try to look for investment vehicles that allow us to control the way w can retrieve our principal as fast as possible, with dividends.
Oftentimes, the best investment vehicle is ourselves.
Do you agree?
Happy Investing!
Aldric
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About the Author:
As a content contributor, I write my observations from daily life and my business exposure.
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Because simplicity adds value.
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