In an intriguing Investment experiment called “Millionaire Invests $100“, a seasoned investor, Mark, decided to invest $100 in various assets to see how they would perform over time. This blog post reveals the results and introduces Tom Rad, a newcomer to investing. Mark surprises Tom by offering him $800 to invest, providing a hands-on learning experience.

The Investment Experiment Breakdown

1. High-Interest Savings Account

• Initial Investment: $100
• Return: 0.04% ($0.04 profit)
• Analysis: While the return was minimal, this account is crucial as an emergency fund. Mark explains that the primary value of a 65 account isn’t in the returns it generates but in the financial security it provides. Having 4-5 months of living expenses saved can protect against unforeseen expenses, avoiding the need to take on high-interest debt.

2. Gold

• Initial Investment: $100
• Return: -0.98% ($0.98 loss)
• Analysis: Despite the slight loss, Mark highlights gold as a hedge against inflation. He educates Tom on the concept of inflation and how gold can help preserve wealth over time, even though it can be volatile in the short term. The discussion underscores gold’s long-term value preservation compared to fiat currency, which depreciates over time.

3. S&P 500 Index Fund

• Initial Investment: $100
• Return: 1.84% ($1.84 profit)
• Analysis: This investment represents a stable, long-term growth option. Mark explains that index funds provide exposure to a broad market segment, reducing risk through diversification. The S&P 500 Index Fund, which includes top companies like Amazon, Apple, and Tesla, is a popular choice for investors seeking consistent returns. The low management fees and the potential for compounding returns make it a solid choice for beginners.

4. REIT (Real Estate Investment Trust)

• Initial Investment: $100
• Return: -0.4% ($0.11 profit after dividends)
• Analysis: Despite a slight dip in value, the dividend payout brought this investment into the positive. Mark explains that REITs allow investors to participate in real estate markets without buying property. They offer the potential for steady income through dividends, often derived from rental income from commercial properties. This makes REITs a good option for those looking for income and exposure to real estate.

5. Business Buying and Selling

• Initial Investment: $100
• Return: $67.87 profit
• Analysis: This approach involves buying underpriced items and selling them for a profit. Mark shares his experience of purchasing a model engine and airplane and reselling them at a higher price. He notes that this method requires specific knowledge and skill, emphasizing the importance of understanding the market for the traded items. This strategy offers high returns but comes with significant risk, depending on the investor’s expertise.

6. Individual Stock (Samsung)

• Initial Investment: $100
• Return: 19.4% ($19.43 profit)
• Analysis: This investment was chosen randomly, showcasing the unpredictable nature of stock markets. Mark discusses the importance of fundamental analysis in stock picking, which involves evaluating a company’s financial health and market position. While this investment paid off, the selection method highlights the role of luck and timing in stock investing.

7. Bitcoin (Cryptocurrency)

• Initial Investment: $100
• Return: 98% ($98 profit)
• Analysis: The high cryptocurrency volatility was evident, with a nearly 100% return. Mark explains the decentralized nature of Bitcoin and how it differs from traditional currency. The discussion touches on the potential for significant gains and losses, making it a high-risk, high-reward investment. The increasing acceptance of Bitcoin for transactions adds another layer of interest for investors.

8. Lotto Scratch Cards

• Initial Investment: $100
• Return: -50% ($50 loss)
• Analysis: This investment was more of a gamble, with a high risk of loss. Mark uses this example to illustrate why lotteries and similar gambles are not viable investment strategies. Despite the allure of a big win, the odds are overwhelmingly against the player, making it a poor choice for serious investors.

Tom’s Investment Choices and Learning Experience

After reviewing the results, Mark gives Tom $800 to invest in his top three choices. Tom opts for:

1. S&P 500 Index Fund: $200
2. Individual Stocks (Tesla and Google): $200 each
3. Bitcoin: $200

Tom’s choices reflect a mix of stability, growth potential, and high risk. This allocation allows him to experience different aspects of investing, from the relatively safe returns of an index fund to the volatility of Bitcoin.

Conclusion: Investment Experiment

Mark concludes by encouraging viewers to start their investment journeys, emphasizing the importance of financial education and early investing. He invites viewers to share their investment ideas in the comments, fostering a community of learning and sharing.