A side hustle you’re actually likely to succeed in, and how to do it.
Most side-hustles online are in pretty competitive spaces, so if you get lucky, you can make the cool money doing something like that, but otherwise you’ll get buried in a wave of competition. A lot of people that write articles or make YouTube videos realize that people are interested in side hustles, and they make content to meet that demand, even if their suggestions aren’t really going to work for anybody. (often times these can also be used to promote scams or pyramid schemes)
A side hustle that really does work, and does not have competition, is Investing! Investing is a real side hustle. If you can save enough to invest $70k you can get $4,200 a year on average. If you save enough to invest $500k (say over 20 years) you can get $30,000 a year. All of this requires no effort other than getting good at saving money and buying stocks every once in a while. Investing is kind of scary for most people, so I’ll lay out here what you need to know, and how you can get started.
How to start
The first thing you’d want to do is make an account on Robinhood, Fidelity, or one of the stock trading websites in listed in this article: https://money.usnews.com/investing/portfolio-management/articles/brokers-that-offer-commission-free-trading
These stock trading services allow you to buy and sell stocks without ‘commission’ (means you don’t have to pay a fee every time you buy or sell). Though most investing platforms should be ok even if they do charge some fees.
Invest
Now that you have an account, what stocks should you get?
I’ve found for me the most reliable options are the stocks that have the label ‘EFT’. These stocks are a bunch of stocks grouped together, so when you buy them you’re really buying a tiny bit, of like 500 different stocks. This helps ensure that in the long term, your investment will go up.
Other than EFTs, I’d just buy stock from companies that make stuff that you like. Simple as that.
One of the stocks that has done best for me over the years is Costco and I originally got it because I liked the $1.50 hot dogs and the free samples. Just buy stocks that you like.
I also like to check the stock’s graph for the last 5 years and make sure it has been going up over that time. If you like the company, and the graph goes up over the past 5 years, it’s a pretty safe stock to get.
However, there are ways to lose money on the stock market and you do need to be careful. Here’s what to do, and what not to do:
DANGER: invest all your money in one stock, only for a short time.
SAFE: invest your money in lots of different stocks, for a long period of time.
Another dangerous thing to do is to sell your stocks when the market crashes (goes down). Oftentimes people get discouraged when the stock value goes down and they want to quit.
A recent crash like this happened at the beginning of COVID:
However, if you look at what happened after the crash, the stock value was back to where it was in just a few months. Can you imagine how bad that would be if you sold all your stocks during the crash? On the flip side, can you see how good it would be if you invested during the crash?
Here’s the stock market graph of the 2008 crash which was arguably worse than the COVID crash:
Even the worst crash in recent history, the stock was back to the same level in just 4 years. And if you had invested more after the crash, you would have been making money during the recession.
Takeaway: if you sell after a crash, you are guaranteed to lose money. If you buy in a crash, you’re likely to make money
The best thing to do is regularly buy stocks in lots of different companies, and then just take your hands off, and let the wonders of the economy work for you.
A great thing about investing, is that it’s often best to buy the stocks that everyone else thinks are good. This is because, as more people buy a stock, the more the stock goes up. So if you’re just an average person with average taste and interests, it’s actually a good thing when it comes to investing!
Saving
When it comes down to it, getting good at investing is really about getting good at saving money. If you can’t save the money, you won’t be able to invest.
A great strategy is to put some of your money into investments right when you get your paycheck. If you do it later in the month, you might not have anything left. So when you get your paycheck, use $100 bucks and buy some stocks. If you do that once a month for 10 years you’ll have 17k of investments making you an extra $1,000 a year. If you can manage to save say $1000 a month, you’ll have $173k in investments making you an extra $11,000 dollars a year. If you leave that $173k in investments, 20 years later it will have grown too $669k without you doing anything. This will make you $43,000 a year!
Here’s a handy calculator that you can use to determine how much an investment can grow. (the stock market has an average return rate of 7%)
https://www.calculator.net/investment-calculator.html
Summary
Here’s a summary of what to do:
- Regularly buy ‘EFT’ stocks, or stocks in companies you like (or stocks that have a good 5-year graph)
- If there is a big crash, try to sacrifice a little more money and buy more stocks
Do not do:
- Buy a lot of a single stock
- Sell during a crash
Conclusion
Buying stocks can be risky if you do risky things, like only buying one type of stock or investing in the short term. If you invest in the long term (planning to continue investing for 20+ years) it’s pretty much always a win.
Other Investments
Here’s some other investments options and what I think about them. (Note, my favorites are still stocks and EFT stocks, and buying them through 401ks, IRAs, and HSAs are even better)
Crypto: crypto is an investment that is very risky. It tends to have wild spikes and dips, which means that some people make a killing and others loose absolutely everything. (That being said, it’s probably better than gambling) It also doesn’t contribute to the economy, so it’s more like the ‘Beanie Babies’ craze or doing weird stuff with converting to foreign currencies.
Real Estate: historically real estate has been a pretty good investment. Property values typically go up over time and a lot of people are able to retire by selling their house and keeping most of the money while moving into a smaller condo or apartment/rest home. That being said, as the earth’s population is starting to go into decline, it’s likely most places will start see property values go down. (Some houses are free in Italy since their population is shrinking) Big cities or places that people like to move, are a better bet for long term growth, but I’m guessing that real estate won’t be that great in the future. (Good news though if you want a house)
Gold, Silver, Precious Metals: gold and silver are a decent investment option. It can be a good way to diversify your investments since gold often tends to do better when stocks are in decline. A gold bar can also be a cool thing to impress your friends and family with! However, in the long term they don’t tend to perform as well as the stock market. Also, precious metals are useful for many products, and buying them up and sticking them in a safe, means your actually working against the economy in a way.
Mutual Funds: mutual funds are a good option if you’d like to invest, but don’t want to worry about selecting the stocks yourself. Basically you give your money to the mutual fund, and they invest it for you. However, they charge fees, and historically most mutual funds have actually performed worse than EFT stocks. So you’ll probably make less money from a mutual fund than you would just buying EFT stocks. I would actually recommend someone like this just invest in the same 4 EFT stocks (which are already diversified) instead of getting set up with a mutual fund.
401k and IRA’s: these funds are actually really great, and a much better option if you’re investing to use the money in retirement. If you get one of these special accounts, you can invest in normal stocks and EFT stocks just like you normally would, but you don’t have to pay as much taxes on the money. Without these, every time you get a pay check you pay taxes. And every time you sell a stock that gained value, you also pay taxes. With an IRA you have to pay tax on your paycheck, but you don’t have to pay tax on how much you got from selling your stocks. With a 401k you don’t have to pay tax on the part of your paycheck you invest, (this is why 401k plans are from your employer), but you do have to pay when you sell your 401k stocks. You can save a lot of money buy not paying these taxes! The catch is that you can’t take money out of these accounts until you’re 60 without having to pay a penalty. These funds are meant to help people save for retirement so the government made these rules to help encourage people to do that. Some employers also promise to match a certain amount every time you put money into your 401k. These is absolutely worth it, and something you should never pass up. Max out their contribution if by any means possible!
HSA accounts: HSA accounts are similar to 401k’s or IRA’s but they don’t have any taxes at all! However, they can only be used for medical expenses. It your job offers one of these, make sure to contribute to it since it will save you a lot of money on medical expenses, especially after you retire.
How the Stock Market Influences Economy
For those of you still interested, here’s how I understand how the stock market affects the economy. You don’t need to know this stuff really, but it can be interesting.
You may have heard how the stock market is an indicator of how strong our economy is, and that is true. When you invest in the stock market, you are contributing to the economy.
One of the biggest roadblocks in business is not having enough money to get something done. When you invest, you are essentially allowing a company to use your money to do something productive. That’s where the value comes from, and why you are rewarded for investing.
The thing is, when you buy a stock, the money doesn’t actually go the company most of the time. When you buy a stock, you’re actually buying it from someone else (like Fidelity or Charles Schwab) that actually bought the stock from the company originally. So the question is, how does investing actually help a company then?
A big part of the this comes down to the nature of what a stock is. A stock is piece of a company. It’s a note that says, I own x % of this company. Most companies keep a large amount of the their own stock, and when their stock goes up (from you buying it) then there’s a few ways they can use their saved stock to get more money:
- Loans: A company can use their stock as collateral on loans. The can say “we’re taking out this loan. If we don’t pay it back you can have x amount of our stock”. For a company that has a really high stock price, they can get so much more money than they otherwise could.
- Employee Compensation: Companies with a high stock price can use stocks to pay employees. This can be a savings for them, especially when their stock price is high.
- Merging or Acquisitions: When buying a smaller company, a company can give their stock to the owners of the smaller company instead of money. These makes it easier to buy another company.
So it’s a little indirect how you help a company by buying stock, but it is a real thing and looking back throughout history we can see how hard a stock market crash is on the economy.
