Smart Investing: Earning A Cool $2K Monthly

Investing is a great way to build wealth and secure your financial future. With $2000 to invest each month, you can explore various options to grow your money and work towards your financial goals.

There are several ways to invest this amount, including stocks, exchange-traded funds (ETFs), real estate, retirement funds, or even alternative investments like artwork or cryptocurrency.

It's important to remember that investing comes with risks, and the performance of your investments will depend on factors like the health of the stock market, the type of assets you choose, and how long you invest for.

Before diving into specific investment strategies, it's crucial to assess your financial situation, define your investment goals, and determine your risk tolerance.

Let's explore some of the best ways to invest $2000 per month and build your wealth over time.

Invest in stocks and ETFs

Exchange-traded funds (ETFs) are a great way to enter the stock market for beginners. They are usually cheap and carry lower risks than individual stocks since they hold a diversified collection of investments.

Step 1: Open a Brokerage Account

You will need a brokerage account to buy and sell securities like ETFs. Many brokerages have no account minimums, transaction fees or inactivity fees.

Step 2: Find and Compare ETFs

There are thousands of ETFs listed in the U.S. alone, so you will need to use a screener tool to narrow down your options. Criteria to consider include administrative expenses (expense ratios), commissions, volume, holdings, performance and trading prices.

Step 3: Place Your Trade

Once you've found the right fund, place the trade. You will need the ETF's unique identifier (ticker symbol), the current trading price, the number of shares you wish to buy, and the order type.

Step 4: Monitor Your Investment

There's no need to compulsively check your investment's performance, but you can access that information via your brokerage's website or by typing the ticker symbol into Google.

Example ETFs for Beginners

• Roundhill Magnificent Seven ETF
• Schwab Crypto Thematic ETF
• Defiance Quantum ETF
• ETRACS IFED Invest with the Fed TR Index ETN
• American Century Focused Dynamic Growth ETF

Advantages of ETFs

• Diversification: ETFs are already well-diversified, so you don't need to worry about creating diversification within your portfolio.
• Transparency: Anyone with internet access can search the price activity for a particular ETF on an exchange.
• Tax advantages: ETFs only incur capital gains taxes when you sell the investment, whereas mutual funds may require you to pay capital gains taxes throughout the lifetime of your investment.

Disadvantages of ETFs

• Potential for additional costs: ETFs may be subject to commission fees from online brokers.
• Liquidity issues: ETFs that aren't traded frequently can be harder to unload.
• Risk of fund closure: If a fund doesn't bring in enough assets to cover administrative costs, it may close, forcing you to sell at a loss and reinvest.

Tips for Investing in Stocks and ETFs

• Start with a single ETF: Even with just one ETF, you can achieve diversified investments globally.
• Look for broad diversification: Choose ETFs that offer broad diversification, a substantial historical performance record, and a sizable fund volume.
• Prioritize low-cost ETFs: ETFs with lower expense ratios will eat less into your returns.
• Consider robo-advisors: Robo-advisors build and manage an investment portfolio for you, often out of ETFs, for a low annual fee.
• Don't put all your eggs in one basket: Spread your risk by diversifying your assets.

Stocks and ETFs for $2k/month

• S&P 500: According to one source, investing $2k per month in the S&P 500 should make you a millionaire in 20 years.
• Oil: Oil is good right now because it's in a steady climb.
• Bitcoin: Investing $2k per month in Bitcoin will make you a millionaire in just a few years.
• TSLY: A high-yield option that could provide $2k per month.
• JEPI and JEPQ: Dividend options that could provide $2k per month with a $30k investment.
• MSCI World ETFs: A solid starting point for those initiating an ETF savings plan.

Get a high-yield savings account

A high-yield savings account is a great way to make your money work for you. These accounts offer a higher interest rate than traditional savings accounts, meaning you can earn more on your savings without taking on additional risk.

The best high-yield savings accounts will have strong interest rates, good perks, and no monthly maintenance fees or high minimum opening deposits. Many of the best banks and credit unions for high-yield savings accounts are online, and your money will be federally insured for up to $250,000 per depositor in the event of a bank failure.

• DCU Primary Savings Account: 0.05% to 6.17% APY
• Varo Savings Account: 2.50% to 5.00% APY
• Axos ONE Savings and Checking Bundle: up to 4.86% APY
• Pibank Savings: 4.75% APY
• BrioDirect High-Yield Savings Account: 4.75% APY
• Openbank High Yield Savings: 4.75% APY
• Popular Direct Savings: 4.60% APY
• Newtek Bank Personal High Yield Savings Account: 4.55% APY
• Bask Bank Interest Savings Account: 4.50% APY
• LendingClub Bank LevelUp Savings Account: 4.50% APY
• Bread Savings High-Yield Savings Account: 4.50% APY
• EverBank Performance Savings Account: 4.40% APY
• CIBC Bank USA Agility Online Savings Account: 4.38% APY
• CIT Bank Platinum Savings Account: 4.35% APY
• TAB Bank High Yield Savings Account: 4.26% APY

While high-yield savings accounts are a great option, it's important to keep in mind that savings accounts aren't necessarily the best place to keep money for long-term financial goals. If you have a long-term goal and are comfortable taking on some risk, you may earn higher returns by investing in stocks.

Pay off high-interest debt

Paying off high-interest debt is a crucial step towards achieving financial freedom and security. Here are some reasons why tackling high-interest debt should be a priority:

Save Money on Interest Payments

High-interest debt, such as credit card debt, often comes with exorbitant interest rates. The average annual percentage rate (APR) on credit cards was over 22% in the first quarter of 2024. By paying off these debts first, you can save a significant amount of money that would otherwise be lost to interest. For example, if you have a $5,000 balance on a credit card with a 20% interest rate and make a $150 monthly payment, you will pay an extra $2,359 in interest over four years.

Free Up Cash Flow

High-interest debt often comes with high monthly payments. By eliminating these debts, you free up cash flow that can be used for other financial goals, such as investing, saving for retirement, or building an emergency fund. This improved cash flow can also reduce financial stress and provide more financial flexibility.

Improve Your Credit Score

Reducing high-interest credit card debt can have a positive impact on your credit score. Credit utilization, which is the ratio of your credit card balances to credit limits, is a significant factor in determining your credit score. By paying down high-interest credit card debt, you can lower your credit utilization, which can lead to an improved credit score. This, in turn, can make it easier to secure loans with favourable terms in the future.

Reduce Stress and Improve Mental Health

High-interest debt can be a significant source of stress and anxiety. The fear of mounting interest and the feeling of being trapped in a cycle of debt can take a toll on your mental health. By prioritising the repayment of these debts, you can improve your overall well-being and gain a sense of financial control.

Avoid Negative Consequences

Some types of high-interest debt, such as tax debt, can have severe consequences if left unpaid. For example, failing to pay tax debt can result in penalties, wage garnishment, or legal issues. By prioritising the repayment of high-interest debt, you can avoid these negative consequences and protect yourself from further financial strain.

Choose the Right Strategy

There are several strategies for tackling high-interest debt, such as the avalanche method, which focuses on paying off the debt with the highest interest rate first, or the snowball method, which involves paying off the smallest debt first. Consider your financial situation, motivation, and preferences when choosing the best strategy for you.

Invest in artwork

Investing in art can be a great way to combine your love of the arts with a hedge against inflation. Art is a massive market with a range of styles and tastes, and it can be a good investment option, especially with the rise of digital art and NFTs.

Research and Understanding:

It is important to research and understand the artists, their markets, and their growth potential. Look for artists with a track record of stable returns and consider their demand among art collectors. Even if you plan to hold onto the artwork for a long time, researching past performance and similar pieces can help gauge the expected return on investment.

Diversification:

Art can play a crucial role in diversifying your investment portfolio. As a unique asset class, art has a low correlation with stocks, bonds, and other traditional investments. Adding art to your portfolio can provide stability and help protect your wealth during volatile economic periods.

Liquidity and Long-Term Investment:

Art, especially physical artwork, typically has low liquidity. Selling a valuable piece of art can be time-consuming, and you'll usually need to go through an art gallery, auction house, or private art collector. Therefore, art often works best as a long-term investment strategy.

Counterfeit and Authentication:

Counterfeit pieces are a common challenge in the art world, and it can be difficult to distinguish a fake from an original. Working with reputable galleries, dealers, and auction houses is essential to minimise this risk and ensure the authenticity of your artwork.

Storage and Maintenance:

Art, as a tangible asset, requires proper storage and maintenance to retain its value. Consider factors such as temperature, humidity, sunlight, and other factors that could degrade the work over time. You may also need to insure your artwork, which can incur additional costs.

Digital Art and NFTs:

The digital art market, particularly NFTs, is gaining popularity. NFTs provide digital art with "digital integrity", making them traceable and verifiable. They are supported by blockchain technology, which offers transparency, authenticity, and liquidity. However, investing in NFTs requires the use of cryptocurrencies, which introduces additional risks due to the volatility of the crypto market.

Art Funds and Fractional Shares:

If you're interested in investing in art but don't want to deal with the hassle of owning physical artwork, consider art funds or fractional shares. Art funds allow investors to partially own pieces of art, and there are platforms like Masterworks that specialise in this area. Fractional shares allow you to buy a portion of a valuable work of art, diversifying your portfolio. Platforms like Maecenas and Masterworks offer this option with a relatively low barrier to entry.

Risk and Returns:

Investing in art carries risks, just like any other investment. Art investments may not generate huge returns compared to the stock market, and they can take time to appreciate in value. Art should be considered a long-term investment, and you should be prepared to hold onto your pieces indefinitely if needed.

Invest in real estate

Investing in real estate is a great way to make $2000 a month. Here are some options to consider:

Rental Properties

One way to generate $2000 a month in passive income is by investing in rental properties. This involves purchasing properties and renting them out to tenants. There are a few different approaches you can take:

• Conventional Lending: You can take out a loan to purchase a property, typically requiring a down payment of around 20%. For example, if you buy a $100,000 home with an 80% loan, you'll need a down payment of $20,000. After factoring in expenses such as property management, taxes, insurance, and maintenance, you can expect a monthly profit of around $200 per property. To reach your goal of $2000 per month, you would need to own around 10 properties.
• All Cash: Another option is to purchase properties with all cash, which eliminates the need for a loan and mortgage payments. This approach requires a larger upfront investment, but can result in higher monthly profits. For example, if you buy a $100,000 home with cash, your monthly profit could be around $655 after expenses. To reach $2000 per month, you would need to own around 3 properties.
• BRRRR Method: This strategy involves buying a property below market value, renovating it to increase its value, renting it out, and then refinancing to get your money back. This method can be a great way to build a rental property portfolio with less money upfront. For example, if you buy a $60,000 home and put in $15,000 for renovations, you can refinance at a higher value and use the cash to invest in another property.

Real Estate Investment Trusts (REITs)

If you're looking for a more hands-off approach to real estate investing, consider investing in REITs. REITs are companies that own and operate income-producing real estate, such as apartments, offices, retail spaces, and more. You can purchase shares of REITs on the stock market, just like you would with any other company. REITs offer the benefit of diversification, as they typically own multiple properties, and provide a steady income through dividends. To get started, you can open a brokerage account with a platform like eToro and invest in REITs that align with your investment goals.

Other Options

In addition to the above options, there are a few other ways to invest in real estate:

• House Hacking: This involves purchasing a multi-unit property, such as a duplex or triplex, and living in one unit while renting out the others. This can be a great way to get started in real estate investing, as it allows you to take advantage of owner-occupied financing and reduce your living expenses.
• Short-Term Rentals: You can also consider renting out properties on a short-term basis, such as through platforms like Airbnb. This approach can provide higher rental income but may require more active management.
• Commercial Real Estate: Investing in commercial properties, such as office buildings or retail spaces, can offer higher returns but typically requires a larger upfront investment.

Frequently asked questions