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How To Grow Your Money With Only 500 Dollars

Updated on May 8, 2012

500 Dollars Might Not Seem Like A Lot Of Cash

You might be wondering how you could grow your money when you only have 500 dollars in the bank. However, you shouldn't fret if you think you don't have what you need to succeed. There are plenty of ways to develop the financial freedom you crave. Keep reading to learn how you can make money for yourself.

Compound Interest Is Your Friend

Compound interest is a great tool for wealth building. Using exponential growth, you can start making more money in no time. Here is an example of compound interest.

You initially invest 500 dollars into the stock market. Your average return is 10 percent. This means you will get 550 dollars if you keep your money in the market for 12 months. However, let's say you reinvest that 50 dollars at the end of 12 months.

That 50 dollars will now start making you 10 percent interest a year. So you now have 500 + 50 + 5. Your original investment is now worth 555 without you doing anything other than putting your interest back into the market.

Keep Investing That 500 Dollars

You can't grow your money unless you continually invest it. Your original investment of $500 will turn into 550 dollars after one year. You will then make 55 dollars in year two. This will result in you having 605 dollars after two years. Do you see how your money is growing exponentially?

605 dollars in the market will then turn into 60.5 dollars in interest. After three years, you will have $665.50 in your investment portfolio. If you invested 500 dollars a month for a year, you would have almost $8000 dollars in your account after just three years without any further investment. Someone who puts their money in the bank would only have $6000 because of a lower return on investment.

Diversify Your Investements

Keeping your initial investment safe depends on investing in many different areas. The key to not losing money is to spread that money around. For example, you should invest in tech stocks, education stocks and defense stocks. At least one of those sectors will be doing well at all times.

Mutual funds are a great place to put your money. They are specifically made for people who want diversity in their investment portfolio. It is the perfect place to grow your money over time.

Government bonds are a good place to put your money as well. The government has never defaulted on a loan it promised to repay. At worst, you won't lose any of your 500 dollars. At best, you can see a 5-10 percent return during good economic times.

Growing Your Money Is Easy

Anyone can grow their money if they are committed to the endeavor. All you have to do is invest in something that offers a decent rate of return. Compound interest will help you grow your wealth exponentially as opposed to at the same rate each month. Mutual funds, government bonds and stocks all will be great places to put your money.

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      Anon 4 years ago

      Do you account for the rate of inflation. If the inflation rate for that year increases by say 8%, the formula, which economists use - interest - inflation rate = 10 - 8 = THE REAL INTEREST, which is about 2 %. Sure you will have 555 dollars in the bank, but in reality all other goods have become 8% more expensive, because of the inflation. In reality you only get 2% from your 500 dollars, you can buy 2x500/100 = 10$ worth of the same stuff you could have when you invested. Investing in a bank is not such a good idea if it's for a short period (less than 2 years) and a small amount. Hope this helps.

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      Person 5 years ago

      Or I can just pick up change I find on the ground for 40 years. That's about the same rate of growth as this.