In 2020 I heard about the $1000 challenge between the online Finance community. It is a 1-year challenge where you invest $1000 in any way you want to see who makes the most money. Since the $1000 challenge has been around for a while, no one has done this challenge in recent times. I thought it would be an interesting experiment to try during the Pandemic. Because I run a personal finance blog, I decided to expand my experiment. I started my $1000 challenge in January 2021 by investing $5000 in FIVE different securities across FOUR categories: Crypto, Real Estate, Retirement, and an Individual Brokerage Account. I used a high yield online savings account as a baseline. For reference, all of my $1000 investments were made in the first week of January 2021.
The Savings Account
Throughout 2021, some of the most popular online savings accounts have offered 0.5% APY. This rate is offered by Ally Bank and Citi Bank. If you deposit $1000 @ 0.5% APY, you will have earned $5.01 after 12 months.
Crypto
I invested $1000 in Bitcoin (BTC) and $1000 in Ethereum (ETH) through Coinbase, a crypto brokerage. These are the two most popular crypto currencies with the largest market caps. Join Coinbase here to earn $10 in Bitcoin. Fortunately for me, I bought my crypto at a good time and made some money on my $1000 investments.
Real Estate
Fundrise is a crowd-funded real estate investing platform that allows you to invest with only $500. I decided invest $1000 for the challenge. Fundrise primarily focuses on investing in commercial residential properties such as apartment buildings and multi-family communities. The catch is that your money will be locked in for 5 years. Join Fundrise here to get $0 in advisory fees for 3 months. After that, you will pay a small fee of 0.85% APY. Scroll down below to see how much I earned after 1 year.
Retirement
There are so many retirement accounts to choose from. I decided to choose a Roth IRA with Wealthfront since I already have two other Roth IRA’s with Betterment and M1 Finance. If you are interested, sign up with Wealthfront here to get $5000 managed free for 1 year. Wealthfront is a robo-advisor. Based on your answers to a few questions, Wealthfront manages your investments for you at a small fee of 0.25% APY. That accounts to a $25 annual fee for your $10,000 investment. Approximately 85% of these investments are in Vanguard ETF’s and 15% are in bonds.
Individual Brokerage Account
There are several platforms to choose from. The platforms known for zero fees include Webull, Robinhood, CashApp, and M1 Finance. I decided to put $1000 into M1 Finance where I can customize my portfolio how I see fit. I invested 25% of my portfolio in several Vanguard ETF’s, 25% in renewable energy ETF’s FAN and TAN, 25% in popular tech companies including Square, Apple, Google, Amazon, and Tesla, and 25% in industrial companies including Trane Technologies and ABB to name a few. Want to try M1 Finance? Join M1 Finance here and get up to $50 when you deposit $100 within 30 days. In my 3 month update, I said that my tech and green energy stocks were not doing well. Unfortunately this was still the case at the 6 month update even though President Biden announced his infrastructure plan that should have theoretically helped the green energy stocks go to the moon. At 9 months, I was still down on Green Energy, Vanguard ETF’s, and Tech Stocks. At the 1 year mark, some of my stocks were doing well enough to bring me above water.
12 Month Update
| $1000 Challenge | 12 Month Update 12/23/21 | Net |
|---|---|---|
| 0.5% APY Savings Account | $1,005.01 | $5.01 |
| Bitcoin (BTC) | $1,333.95 | $333.95 |
| Ethereum (ETH) | $1698.42 | $698.42 |
| Fundrise | $1,041.94 | $41.94 |
| Wealthfront Roth IRA | $1,040.39 | $40.39 |
| M1 Finance Brokerage | $1013.70 | $13.70 |
Conclusion
All of my investments have increased since my last update except for Bitcoin. Fundrise has continued to be a safe and conservative investment performing better than savings accounts and my selections in my Individual Brokerage account and Roth IRA. Ethereum blew all of my investments out of the water. It was my top performing but riskiest investment at the 6 month, 9 month, and 12 month update. In total I have made $1,128.40 from my total $5000 invested. That is a 22.6% return on investment.
While I did not count this in my earnings, I also earned more than 4% APY through my BlockFi Interest Account where I store my Bitcoin and Ethereum.
It is no surprise that crypto was my best performing asset. High risk is high reward, right? The poor performance of my individual brokerage account proves that you can’t beat the market. I believe its best to leave the investing up to a robo-advisor or the professionals with Wealthfront. While my Fundrise real estate investments performed better than most, it is the least liquid of all of these accounts. Your money is locked in for 5 years with Fundrise.
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