Investing for the little guy

[checkthebudget]

Lets say, for example, that I have $1000 in my mad money budget. Naturally, I'd like to double that over the next year or so. Without going into debt, how do I take such a small sum and invest it without buying stocks/bonds. Is there not other investment for the little guy? No, I'm not interested in raising chinchillas or red worms either.. Are there any income-producing assets you can buy with so little money? I suppose I could buy an old motorcycle or something and fix it up for resale (if I had that talent).. Maybe, since I don't know much about motorcycles, that would be too risky...

[Broken Arrow]

Double in one year?

No matter what you pick, it's going to be extremely risky.

Sorry to be the wet blanket, but I don't think that's a realistic expectation, even with mad money.

But if it were to be done, you're on the right track though. Either use it to start your own business or buy stock in a start-up business. But if stock (or VC) isn't the option, then I guess you're limited to the former (and not look at the statistical odds against small-businesses in their first year).

[noppenbd]

Go to Vegas and bet on black. Easy money.

[checkthebudget]

Now, now, if I wanted to gamble I would just buy stocks..

I've been to garage sales to look for things to sell on Ebay. Supposedly this is a tried and true method, but all I ever find is cheesy plastic kids stuff.

What other ideas do you all have for things that could be invested in? This seems a little silly, but take gum-ball machines for example. That seems to be a way for a small investment to be income-producing. Any other ideas in this line of thought?

[LuxLiving]

Invest in yourself. Take some classes that will increase your earning power.

[Broken Arrow]

I don't think stock buying is gambling (though it can be if it's not done right). However, this has already been discussed in the past and I'm not in the business of changing people's minds.... So, to each their own I guess.

To me, the best way to double 1k is to use it to help you get a second job.

[LuxLiving]

If you absolutely don't have to double it so quickly, there are ways of investing it rather more safely than in stocks. Try a MM, a CD, a savings bond, etc. No frills investing for the beginner.

[disneysteve]

Originally Posted by Broken Arrow

No matter what you pick, it's going to be extremely risky.

Originally Posted by noppenbd

Go to Vegas and bet on black. Easy money.

Originally Posted by checkthebudget

Now, now, if I wanted to gamble I would just buy stocks..

I've been to garage sales to look for things to sell on Ebay. Supposedly this is a tried and true method, but all I ever find is cheesy plastic kids stuff.

I think you can double $1,000 in a year easily with ebay. I've done it many, many times over. The key is finding something worthwhile to sell at a great price. I'm not real active on ebay anymore, but one thing I used to do quite well on was buying Christmas items at after-Christmas sales when they were 75% off. For example, I'd buy Hallmark ornaments. Original price $20. Sale price $5. Resell for about $10.00 and repeat. I also used to buy items on clearance at certain outlet stores (like the Lenox outlet) and resell them. The buyer still got a bargain and I multiplied my money. I sold $150 items for $40 that I bought for $10. Even after subtracting sales fees, that is still a great mark-up.

As for the casino, stay away from the roulette table. The game to play is blackjack. Best odds in the house if you know what you are doing.

The stock market is an option, but doubling in a year is unrealistic. You'd have to really take a leap on a risky stock. Honestly, your odds are better at the casino.

[tripods68]

Your expectation is extreme high for 1-year return considering you want to double your money without taking some market risk. There are partnership you could look at, like investing on start up company. I was one of multiple investors that funded a salon in our area when the owner came to me looking for capital infusion for his business. He needed to expand his business and remodeled the whole thing. I invested $2500 initially. I got back 21/2 years later the full $2500 plus a 50% return on investment. He opened up more salons and did very well.

There are thousands of business opportunities around you have to know certain people and where to look for. And a bit of luck helps

[checkthebudget]

I've seen a few websites in the past that were for micro-enterprise type loans. These were usually to 3rd world borrowers and were loans of like $25. I wonder if there is a website that organizes 100 average Joe's loaning $1000 each for somebody to start a business? Naturally, this wouldn't double your money, but could be fun, interesting, and "tangible"...

[noppenbd]

Originally Posted by checkthebudget

I've seen a few websites in the past that were for micro-enterprise type loans. These were usually to 3rd world borrowers and were loans of like $25. I wonder if there is a website that organizes 100 average Joe's loaning $1000 each for somebody to start a business? Naturally, this wouldn't double your money, but could be fun, interesting, and "tangible"...

There is... prosper.com.

Not without risk though...

[Broken Arrow]

The idea of micro-loans through peer-to-peer lending has crossed my mind, but one quick look through Prosper, and you can see that even the riskiest borrowers can't and won't pay 30% interest, to say nothing of 100%.

[buzz]

Originally Posted by noppenbd

Go to Vegas and bet on black. Easy money.

There was just a story about an English gentleman who went to Vegas, put his life's savings on red and won.

Now, does that mean red is hot, or black is due?

[disneysteve]

Originally Posted by buzz

Now, does that mean red is hot, or black is due?

Neither of course. It's all random.

There was another guy a few years ago who sold all his worldly possessions and bet a couple hundred thousand dollars on one spin of the wheel. I think he won also.

Seriously, though, these folks have to start betting on a single hand of blackjack instead. Better odds.

[tvass]

The Technology Stock Advisor Weekly Advice Column For May 28, 2008
Realistic Rates of Return
What Is Real?
One of my favorite stories was the Velveteen Rabbit, when the stuffed rabbit said he knew he was real because someone had hugged him so hard that the velvet had worn off of his nose.
Sometimes, when I see questions about real rates of return from investing, I think someone may need to have their nose rubbed hard, too.

A good example is the question submitted on the website Saving Advice by the investor who states that he has some “mad money” that he would like to invest and get double his money in one year.
Here is his question:

Investing for the little guy

“Lets say, for example, that I have $1000 in my mad money budget. Naturally, I'd like to double that over the next year or so. Without going into debt, how do I take such a small sum and invest it without buying stocks/bonds.”

Without Buying Stocks or Bonds?
The investment returns on stocks and bonds are one of the few places in the financial world where there is solid empirical evidence about performance over a long period of time.

Even if the investor who asked the question did not want to invest in stocks and bonds, the returns in that market provide a valuable benchmark to compare to other potential investments.
Since he wants to double his money, in one year, he needs at least a 100% gain on his $1000 investment.
How rare would that type of gain be in the stock market?

Stocks that doubled
In his investment column, Ben Steverman compiles the list of stocks that doubled over “a couple of years.”

He begins his story by stating, “In my new story and slideshow today, BusinessWeek asked fund managers and other stock market gurus to recommend stocks they think could double in the next couple years. As I say in the article, it’s a tough task: Less than 100 stocks — out of almost 6,700 that trade on major U.S. exchanges — succeeded in doubling in the past year, according to data provider Capital IQ.

Return Rates and Risk
A realistic rate of return on S&P 500 stocks over a long period of time would be about 10-12%. For risky private companies, that do not trade on the public markets, the economists at the University of New Hamshire estimate returns for private investments for 2007 ranged from 20% to 40%


Along the way to those rates of return, there is also a rate of loss. In any given 5 year period of time for the larger public stocks, there is a high likelihood that the initial investment could be down as much as 40%, or up as much as 40%.

For the private companies, there is about a 50% chance that the single private venture capital-backed company will go out of business in a three year period of time.

My Advice To The Investor
The term “mad money” is the right description of the idea that $1000 would double in one year.

One of the columnists wrote in to suggest that the investor open up an E Bay account and buy and sell goods online. Another suggested he go to Vegas and always bet on black on the roulette table.

I have a better idea: Buy a closed end government bond trust and put the dividends on reinvestment, and forget about the idea of doubling the amount in one year.
I would hazard a guess that my advice would result in about double whatever else the investor decided to do.

[Broken Arrow]

Very strange but fascinating response, tvass.

I agree that even with stocks, it'd be extremely difficult to find ways to double the money (in one year).

Seriously, the best way to do is to invest in a second job (or definitely a first job if you don't already have one). Employment can easily more than double that 1k.

[aevans1206]

Originally Posted by disneysteve

Neither of course. It's all random.

There was another guy a few years ago who sold all his worldly possessions and bet a couple hundred thousand dollars on one spin of the wheel. I think he won also.

Seriously, though, these folks have to start betting on a single hand of blackjack instead. Better odds.

The thought of betting all I'm worth on something scares me into needing a toilet. Geez.

[disneysteve]

Originally Posted by aevans1206

The thought of betting all I'm worth on something scares me into needing a toilet. Geez.

I know what you mean. My palms get sweaty when I put down a $100 bet. I can't imagine betting everything I had.