(Why yes, those are my Hello Kitty sheets. Thanks for asking.)
Say you were one of those young kids that I’m always hearing about, the DREADED millennial generation. God, I hate them so much, and I’m even technically one of them. We get it, you’re changing the world in SOOOOOOO many ways. Can you shut up about it now? You’re the generational equivalent of people who do crossfit or don’t have a television.
One thing the youngins struggle with is investing. It seems like I see someone on the Reddit every day ask the same stupid question about investing for the first time. They’ve accumulated $1000/$5000/$592528592 (Grandpa kicked it, baby! Finally! Rot in hell ya old bastard!) and they’re looking for somewhere to stick that cash.
As you’d expect, the same sorts of ideas get brandied about. Do a couch potato portfolio. Give it to Tangerine for that sweet, sweet 2% interest. Hey, at least it’s guaranteed. Or if you’re feeling frisky, maybe stick it in an individual stock or some bizarre ETF.
Those might be decent enough options for your retirement nest egg. But if I was 18 over again and only had $1000 to invest, I’d do things very differently than what the consensus would dictate.
Swing for the fences
Let’s face it. If you’re going to set yourself up for financial success, $1000 isn’t a lot of money.
Don’t get me wrong; if you wanted to give me $1000 I’d gladly take it. I’m not suggesting you go and light the cash on fire, or even worse, spending it on Coca-Cola stock. But unless you’re Cletus the Slack-Jawed Yokel, having $1000 to invest is likely something that will happen many times in your life. Hell, if you’re making a normal salary and have any saving skills whatsoever, getting an extra G note to tuck away should be happening every month. At least.
Knowing that, losing your first $1,000 investment isn’t going to be the end of the world. You’ll make it back many times over. So I say swing for the fences. Take that $1,000 and put it in the riskiest investment you can find.
Of course, that doesn’t mean you should go and blow your brains out on the first risky thing that tickles your investing bone. That’s the investing equivalent of picking up a girl at the bar and not wearing a rubber.
Investing in something like coal stock isn’t a good idea if you don’t know how to read a balance sheet or an income statement. And if you barely know what the commodity is used for, maybe investing in coal shouldn’t be for you either.
(It’s not a coincidence I keep mentioning coal. I have investments in a coal producer and a coal-fired power company. I think it’s a great contrarian play.)
It doesn’t have to be a purely passive investment. In fact, I’d encourage everyone to think outside of the traditional investment realm. When I was 19, I bought $600 worth of DVDs that were selling for $6 each from a store, hoping to resell them for a profit on Ebay. It didn’t go so well, and I probably lost $500 on the deal before finally giving up. The DVDs are still in my parents’ house somewhere, collecting dust, so make me an offer. The bidding starts at $50,000.
Sure, I lost $500, but I also learned a great deal in the process. Selling stuff for $8 per pop on Ebay is time consuming and boring. And hawking a commoditized product is not a good idea. I also learned the benefit of drop shipping, as well as learning that making $2-$5 on a DVD before going to the post office wasn’t very exciting. Profit margins are important.
That was a valuable lesson worth far more than $250 for me. So even though my initial investment was a failure, I’m still fine with it. If only my failures these days only cost me $500.
If you have $1000 to invest and you stick it in ETFs or other so-called traditional investments, the upside is pretty limited. If the market has a great year and you’re up 20%, congratulations. You’re up a whole $200. That’s not even the price of a good night out for many people reading this.
But if you invest in something with the potential to double or triple in a relatively short period of time, there’s a chance to grow that original $1000 investment into something worth much more.
This likely won’t be in an individual stock, since most people with only $1000 to invest aren’t going to know much about them. If that kind of investment works out, it would be because of luck, not skill. But it could be flipping something, or investing in the equipment needed to start a side business. The sky is the limit if you think outside of the box.
$1000 isn’t a lot of money. It’s okay for you to take risks with it, especially if you’re young with plenty of time to make that money back. And if it doesn’t work out, you’ll at least have learned a few lessons. Save the conventional stuff for the 2nd, 3rd, and 100th thousand.