How to Invest $5,000: What Would You Do?

For those who are risk adverse to those who are risk daredevils, investing $5,000 can result in a variety of payouts. Generally speaking, the higher risk you take, the higher the reward will be. $5,000 might not seem like a lot of money, but that amount after 30 years will net you over $50,000 with a conservative 8% rate of return. If you have the foresight to invest $5,000 each year for the next 30 years, your pot will grow to $662,000 using the same metrics. [These numbers obviously ignore inflation.] But if waiting 3 decades might seem like awhile, here are a few suggestions on how to invest $5,000 for different personalities and tolerance levels.

Super Risky [for those who have money to burn]

1. The Lottery – If you want the chance for your children’s children to not work, then this is the option for you. Buying lottery tickets in bulk improves your chances, albeit ever slightly, of hitting it big. Consider going for the Quick Picks rather than the Scratchers to avoid potential carpal tunnel. Definitely not approved by us over here at Ploomy, but please don’t forget about us if you actually win it.
2. Go to Las Vegas – The house always has the advantage, but if you’re feeling lucky, Craps and Baccarat give you lower house edges than Blackjack and Roulette. If you want to make a sporting event more fun, head over to the Sports Book and place a wager on a game – you’ll sweat like Dick Vitale. Here’s a tip: women’s college basketball tends to cover more than higher profile men’s sports.
3. Buy Art – Like the X-Men, maybe you have an uncanny eye for a potential masterpiece from an unknown artist. Peruse over to a local gallery to see what you can buy in this range. Purchase one of their pieces now and later on sell to a hedge-fund manager for as much as you can. Keep in mind the art industry is heavily unregulated, so therein lies greater risk.

Moderately Risky [for those who want to invest outside of their retirement and brokerage accounts]

1. Foreign Exchange – Once upon a time, the US Dollar was the benchmark for currencies worldwide. In our sluggish markets however, foreign currency has become more potent and thus FOREX more popular. Look for rising GDP, job-growth and other economic indicators to show whether or not it’s wise to invest in a particular market. You can leverage your gamble with up to 100x your contribution to reap a potential windfall, but be sure to have a backup plan if it backfires.
2. Precious Metals – Gold and Silver bullion can be a good hedge during turbulent times of the economy and also to protect against inflation. Owning shares of GLD and SLV can be easily liquidated, but it would be pretty cool having bricks of gold sitting in your safety deposit box.
3. Start a Business – Or with $5,000, become a partner or investor in one. All start-ups require capital to jumpstart their business. While you might be dry of ideas, maybe the kid who hasn’t left his basement in 2 years is developing something to make Mark Zuckerberg envious. Review the many small business publications out there to see if any endeavors intrigue you.

Risk Adverse [for those just starting to invest]

1. Roth IRA – Beginning in 2008, the maximum you can contribute to a Roth IRA is $5,000 for those having an adjusted gross income under $110,000. If you just want to complement your 401(k) at work, this would be ideal. The best part is since you’re using post-tax money to contribute, you won’t get taxed when its time to withdraw. Also note that more companies are offering Roth 401(k), which provide similar benefits.
2. Exchange-Traded Funds – Rather than analyzing individual stocks, it’s a safer bet just to invest in a fund. ETF owners have the advantage of having a diversified index and generally have lower commissions and expense fees than other types of funds. If you can’t differentiate EPS from UPS, then this is something to consider.
3. Savings Account/Certificate of Deposit – Nothing else listed is backed by the FDIC, so applying funds here is definitely the biggest safety net. Building a CD ladder can make money accessible after a certain period while taking advantage of compound interest. Savings Accounts, just not at a brick-and-mortar location, can be useful only if you require immediate access to your money.

Keep in mind these are just a few suggestions of earning a return on investment of $5,000, ranging from sound to sounds dumb. Figure out how much you’re willing to risk before you make any type of venture. Also it would be prudent to diversify your portfolio to help protect you against any significant market swings. Just be sure to do your diligence and research prior to making any investment.

Article suggested by Mike H. in Austin, TX. To suggest an article email anthem123 at yahoo dot com.

photography by:
mvhargan, Sid/Stephen, rednuht, PPDIGITAL

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