Content of the material
- What is Robinhood?
- Can an Investor Use All Five Ways in the Quest to Double Ones Money?
- Can You Make Daily Returns by Investing?
- What Strategy Is Best for You?
- Motley Fool Returns
- 3. The Safe Way
- 3. Reinvest Your Dividends
- 2. Invest in a money-making course
- Day Trade
- Risks With Robinhood
- Invest Smarter with The Motley Fool
- Earn Compound Interest
- Other Circumstances to Consider When Investing
- Invest in Your Strengths
- 7. Flip real estate contracts
What is Robinhood?
Robinhood is a financial technology company that makes investing friendly, approachable, and understandable for beginners and experts alike.
Robinhood disrupted the financial industry for the better by offering zero commission fees, no account minimums, fractional shares, crypto exposure, and a simple, mobile-friendly sign-up process. It has an easy-to-use and sleek design that feels like social media. The platform also uses user networks to create a large volume of trades.
Robinhood incentivizes its users in different ways. It celebrates your trades with bursts of confetti after each transaction. It also gives you free stock if you refer friends to the platform. Essentially, Robinhood offers gamification of the stock market.
Now that you know what Robinhood is, let’s look at how to make money with Robinhood.
Can an Investor Use All Five Ways in the Quest to Double Ones Money?
Yes, of course. If your employer matches contributions to your retirement plan, take advantage of that perk. Invest in a diversified portfolio of stocks and bonds and consider being a contrarian when the market plunges or rockets higher. If you have the risk appetite and want some sizzle on your steak, allocate a small portion of your portfolio to more aggressive strategies and investments (after doing your research and due diligence, of course). Save on a regular basis to buy a house and keep the down payment in a savings account or other relatively risk-free investment.
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.
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What Strategy Is Best for You?
Which strategy is best for you as an owner depends entirely on the rate of return management can earn by reinvesting your money. Sometimes, paying out cash dividends is a mistake because those funds could be reinvested into the company and contribute to a higher growth rate, which would increase the value of your stock.
Other times, the company is an old, established brand that can continue to grow without significant reinvestment in expansion. In these cases, the company is more likely to use its profit to pay dividends to shareholders.
Valuable investments can choose any of these paths. Berkshire Hathaway, for example, pays out no cash dividends, while U.S. Bancorp has resolved to return more than 80% of capital to shareholders in the form of dividends and stock buybacks each year. Despite these differences, they both have the potential to be attractive holdings at the right price.
The best way to determine whether a stock is a good investment is to look at the company's asset placement and understand how it manages its money.
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3. The Safe Way
Just as the fast lane and the slow lane on the highway will eventually get you to the same place, there are quick and slow ways to double your money. If you prefer to play it safe, bonds can be a less hair-raising journey to the same destination.
Consider zero-coupon bonds, for example. For the uninitiated, zero-coupon bonds may sound intimidating. In reality, they’re simple to understand. Instead of purchasing a bond that rewards you with a regular interest payment, you buy a bond at a discount to its eventual value at maturity.
One hidden benefit is the absence of reinvestment risk. With standard coupon bonds, there are the challenges and risks of reinvesting the interest payments as they're received. With zero-coupon bonds, there's only one payoff, and it comes when the bond matures. On the flip side, zero-coupon bonds are very sensitive to changes in interest rates and can lose value as interest rates rise; this is a risk factor to be considered by an investor who does not intend to hold a zero-coupon bond to maturity.
Series EE Savings Bonds issued by the U.S. Treasury are another attractive option for conservative investors who do not mind waiting a couple of decades for the investment to double. Series EE Savings Bonds are low-risk savings products that are only available in electronic form on the TreasuryDirect platform. They pay interest until they reach 30 years or the investor cashes them in, whichever comes first. Although the current rate of interest is a paltry 0.10% for bonds issued between November 2021 and April 2022, they come with a guarantee that bonds sold now will double in value if held for 20 years. The minimum purchase amount is $25, while the maximum purchase per calendar year is $10,000. Savings bonds are exempt from state or local taxes, but interest earnings are subject to federal income tax.
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.
2. Invest in a money-making course
Investing in yourself is one of the best possible investments you can make. While you might not be able to pinpoint an actualized return on investment, there’s no money that’s better spent. Invest in yourself. Invest in your education. Learn. Adapt. Grow. Discover what you’re passionate about.
There are loads of money-making courses on the internet. The hard part is choosing the right one. From ebooks to social media marketing, search engine optimization and beyond, the possibilities are endless. While many money-making gurus might pop up on social media, not all courses are created alike. Spend time doing your due diligence and research to choose the one that’s right for you.
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.
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.
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Earn Compound Interest
The main reason the stock market has been such a tremendous wealth generator is the effect of compound interest. While you can make short-term profits in the stock market, it’s actually a safer bet to leave your money in the market for the long term and let compound interest do its magic. For starters, the longer you leave your money in the market, the less risk you actually take. While no one can predict what the market will do from year to year, the S&P 500 index has actually never lost money over any 20-year rolling period. That’s an amazing statistic when you think about how volatile the market can be over the short run. If you can keep your money in the market for 10, 20 or even 30 years, your potential to build wealth is tremendous. Think about it this way: If you put $10,000 in the market and earn 10% per year, taking out your profits each year, you’ll have a net profit of $30,000 after 30 years, or three times your money. But if you instead let that money compound every year at 10%, you’ll end up with just under $200,000, or 20 times your money. This may not be the answer that those looking for a quick buck want to hear, but the best, safest way to generate real wealth in the stock market is to stay in it. More From GOBankingRates 2022 Stimulus Checks: Is Your State Giving Out Money This Year?Nominate Your Favorite Small Business To Be Featured in GOBankingRates’ 2022 Small Business SpotlightWhat To Do With Your Money During High Inflation17 Biggest Budgeting Mistakes You’re Making
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.
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!
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:
7. Flip real estate contracts
Making money with real estate might seem like a long-term prospect, but it’s not. There are ways you can take as little as $500 to $1,000 and invest it in flipping real estate contracts to make money fast. How? Use a system like Kent Clothier’s REWW to first understand how the market works. It’ll then provide you with the data and tools to identify vacant homes, distressed sellers and cash buyers.
While most people think that real estate is won by flipping traditional homes and doing the renovations yourself, the fastest money you can make in real estate involves flipping the actual contract itself. It’s arbitrage. Identify the motivated sellers and cash buyers, bring them together and effectively broker the deal. It might seem odd on the first go, but once you get the hang of it, you can become a mini-mogul in the real estate industry by simply scaling out this one single strategy. It works, and it’s touted by some of the world’s most successful real estate investors.