How much do you need to invest to make $1,000 per month?
The average investor will need to invest between $120,000 and $400,000 in order to earn $1,000 per month. The stock market is one of the most common ways of generating $1,000 per month from yields ranging between 3% and 10%. Investors will make their $1,000 per month through income, such as dividend payment, or price appreciation, known as capital gains.
Imagine being able to make $1,000 per month from your investments. $1,000 is a huge amount of money to most people.
Your investments can automatically make you this much every single month.
Luckily for you, I will show you how much you need to invest to make that $1,000. I’ll even show you some of the best investments to make that $1,000 per month. You’ll be well on your way to earning an income as an investor.
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How much do I need to invest to make $1,000 a month?
You need to invest between $120,000 and $400,000 to earn $1,000 per month in passive income from the stock market. This assumes that you are investing in dividend stocks or exchange-traded funds with dividend yields between 3% and 10%.
There are two ways you can earn $1,000 per month in the stock market, capital gains or dividends.
You can either have enough invested into dividend-paying assets that will pay you cash for ownership. Alternatively, the value of your stocks can increase. This means you’ll have to sell enough shares to take the $1,000 per month as income.
For example, VYM is a high yield dividend exchange traded fund. The fund will typically have a dividend yield around 3%. Therefore, you will earn $3 for every $100 you have invested in the fund as a dividend payment.
Some investors choose to invest in growth stocks which can also produce $1,000 per month in income. The main problem is that you don’t know how much your stocks are going to grow or if they will produce negative returns.
For example, the S&P 500 has typically seen returns around 10% on average. Some years, the S&P 500 will return over 20% and other years will return a negative return on investment.
You would receive $12,000 in capital gains on $120k invested if the S&P 500 returned 10%. Alternatively, you would lose $3,600 if the S&P 500 lost 3% on $120k invested.
Here’s how much money you need invested depending on yield to earn $12,000 per year:
|To earn $12k per year in dividends at this yield:||You would have to have this much money invested:|
As you can see, you need a lot more money invested if you only receive a 3% return on your investment. However, you need significantly less money if you receive a high yield, such as 10%.
The flip side is that high dividend yield is not always the safest path to take. You have to ensure that your investment is going to protect the money you invested initially. In other words, investing in high dividend yield assets may be risky.
Where can I invest to make $1,000 a month
The best places to invest to make $1,000 per month include dividend exchange-traded funds, stocks, real estate, REITs, covered call ETFs, and businesses. Each of these Investments are capable of generating $1,000 per month in income passively.
Let’s take a look at some of the best places to invest your money if you are looking to earn $1,000 per month.
Dividend Exchange Traded Funds
Dividend exchange-traded funds are a collection of individual dividend paying stocks. You invest in one fund, such as VYM, and you are invested in hundreds of individual companies.These companies will pay you a cash payment, known as a dividend, just for being an owner in the company.
The NASDAQ is a good place to check the history of the fund’s dividend. As you can see, VYM has continually paid a dividend for the last 10 years and the dividend has continued to increase.
Personally, I like dividend exchange-traded funds because of the diversification. Individual stocks can be risky if they cut their dividend or go bankrupt. Investing in an exchange traded fund means you are well diversified and protected if one company goes bankrupt.
Real estate is another good example of how you can make $1,000 per month. As a real estate investor, you can use the bank’s money to help build your wealth. Therefore, you don’t need hundreds of thousands of dollars to start seeing profit.
Let’s assume that you manage to find a duplex selling for $300,000. A 20% down payment would require you to invest $60,000. Each unit is making you $850 per month in rental income.
Your rental property would generate you $20,400 in rental income in the first year. You might have to pay $3,000 in fees or repairs throughout the course of the year. Therefore, your net income is $17,400.
Most real estate investments average about a 10% return on investment. However, this only considers the cash payment of your rental income. Your rental property can also benefit from price appreciation which can also help build your wealth.
Dividend stocks are individual companies that pay a cash payment, known as a dividend. How much each company pays is shown via the dividend yield, or a percentage of cash payment to share price.
For example, the company might be trading at $100 and pay an 8% dividend yield. Therefore, the company would pay $8 in cash payment over the course of one year.
Dividend stocks can be purchased with your brokerage account, such as Robinhood.
Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts are very similar to dividend paying stocks. The main difference is that Real Estate Investment Trust invests in real estate companies.
Covered Call ETFs
Covered call exchange-traded funds are considered income assets. A cover call exchange traded fund sells options against the particular Index Fund. These options allow the fund to generate an income which is typically a higher yield than you’ll find elsewhere.
For example, QYLD is a covered call exchange-traded fund. The fund will pay a dividend yield around 10 to 12%.
The main downside with investing in a covered call exchange-traded fund is the sacrifice to growth. A covered call ETF primarily focuses on a cash payment, meaning you won’t see much price appreciation.
There are plenty of businesses you can buy or build that will pay you $1,000 a month or more. Examples include vending machines, websites, Retail Arbitrage, and social media marketing. Some of these businesses will continue to pay you just for being an owner.
For example, you could own a website that makes you $1,000 per month. This website requires little upkeep and continues to make you money 24/7 because it’s live on the internet.
Summary: How much do I need to invest to make $1,000 a month
As you can see, it is possible to make $1,000 per month from investments.Typically, you will need about $120,000 to $400,000 to make $1,000 per month. How much money you make depends on your return on investment or dividend yield.
It is not unreasonable to be able to get a 3% to 10% dividend yield from certain investments. Some of the best investments include dividend paying stocks or ETFs, covered call ETFs, real estate, businesses, and Real Estate Investment Trust.