• laughing friends drinking wine

    Investing is anyone's game. And putting money in the stock market while you're young is one of the best — and easiest — ways you can set yourself up for a comfortable retirement.

    But the reality is many people don't invest — especially younger Americans, who keep as much as 70% of their portfolio in cash, according to a recent BlackRock survey.

    In a recent blog post, ESI Money, a blogger who retired at 52 with a $3 million net worth, said "waiting to invest" is one of the "worst money moves anyone can make."

    After all, investing your savings in the stock market, rather than stashing it in a traditional savings account, could amount to a difference of up to $3.3 million over 4o years.

    Luckily, investing isn't as complicated as it seems. According to ESI Money, there are three factors that determine how well your investments will perform:

    1. Your timeline

    ESI Money crunched the numbers and found that time is the most important factor in how well your investments perform. "[T]he longer you wait to save and invest, the more you're costing yourself," he said.

    In other words, it's all about maximizing the benefit of compound interest.

    Take a look at the chart below, which illustrates the difference in savings for a 15-year-old who puts $1,000 of their summer job earnings into a Roth IRA — a retirement account where your savings grow tax-free — for four years and then stops, and a 25-year-old who puts away $1,000 until age 28 and stops.

    Assuming a 7% annual rate of return, the early saver will have nearly twice as much money saved by age 65 as the late saver, with no extra effort whatsoever. Even if the late saver continued putting away that same amount until age 30, they'd still come up short.

    The best way to maximize earnings is to keep saving and investing consistently, but the idea remains: The more time your money has to grow, the more you'll end up with.

    2. How much you invest

    How much money you earn will be based partially on how much you invest. The good news is that you don't have to invest a ton of money to earn a lot over time. You can easily start by contributing 15%, 10%, or even 5% of your pre-tax income to a retirement account, like a 401(k) or IRA.

    If you're worried about investing too much money for fear of losing it, don't be. Stock market investors had over a 99% chance of maintaining at least their initial investment — the same as a traditional savings account, according to a recent NerdWallet analysis of 40-years of historical returns.

    3. The return rate

    The NerdWallet analysis also found that investors had a 95% chance of earning nearly three times their initial investment, while traditional savers had less than a 3% chance of tripling their investment.

    Still, the rate at which your money grows is completely out of your control. That's the nature of the stock market — not even legendary investor Warren Buffett can guarantee big returns.

    Ultimately, you're doing well if your investment outpaces inflation, which won't happen if your money is shored up in a bank account with super low interest rates. To minimize risk, diversifying your investments across different types of companies, industries and countries is key.

    You can start by investing in a low-cost index fund that does the diversification for you — like the Vanguard Total Stock Market Index Fund. Another increasingly popular tool for novice investors are robo-advisors, which use an algorithm to build and manage your portfolio for a small annual fee. Or, you can follow Buffett's advice to stick with a simple S&P 500 index fund, which invests in the 500 largest US companies.

    These are commonly called "set it and forget it" investments that grow over time, regardless of short-term performance. Just make sure you're not paying annual fees higher than 0.5% or it'll eat into your returns.

    ESI Money sums up the winning formula best: "Save early, save often, and save more as time goes by."


  • Startup investing is a funny thing. Sometimes it feels like you are on fire. You see exciting companies and founders coming one right after another. Other times, nothing coming through the pipeline feels quite right, no matter how many you are seeing. After experiencing several of these hot and cold cycles, I was curious how normal this is. I decided to take a look.

    Let’s begin with an idea that many investors strive for: investing at a steady pace. Simple, right? Investing at a steady pace sounds intuitive enough. The only problem is that it's a bad idea.

    The reality is that the best opportunities are not evenly distributed over time. Randomness is clumpy. If you invest in only the best opportunities, whenever they arise, you will have busy and slow periods. Smart investing plans for the clustering.

    Consider the math. I randomized 10,000 scenarios to understand how the ten best investments I see every year will be distributed over that time. The results are interesting for any investor. If you want to run your own scenarios, feel free to use the basic model I built here.

    I target ten investments a year. You might think that I would aim for 2-3 investments per quarter. But actually, the randomized scenarios make it clear that a “normal” quarter only happens half of the time. I am just as likely to have a sleeper quarter (0-1 deals) or a slammed quarter (4-6 deals).

    A few other highlights from my analysis:

    • In 3 out of 4 years, there will be one sleeper and one slammed quarter—big ebbs and flows are the norms. You should plan on this, not on steady investing over a year or a fund's life
    • In 1 out of 3 years, half or more of the best opportunities will come in a single quarter
    • In 1 out of 4 years, you will have a quarter with zero opportunities

    The lesson is clear: investors who try to invest at a steady pace will not be investing in the best opportunities. To only invest in the best companies, you need a flexible investing calendar.

    This math assumes that the best deals are randomly distributed throughout the year. If you believe that there is seasonality driven by accelerators, school graduations, or founders quitting jobs at the end-of-year, then the opportunities will be even more clustered.

    I struggle with this myself sometimes. Recently, I had made two back-to-back investments when a third exciting startup also caught my attention. At the time, I questioned whether I was being too eager, perhaps having too optimistic an outlook that month. The reality, though, is that opportunities very often cluster, and I did make that third bet—a clear win in hindsight.

    There are of course some advantages to investing at a steady pace. Remaining active in the market keeps your networks active, your brand fresh, and your knowledge relevant. It simplifies planning for a fund's manager and limited partners. And it prevents you from letting good opportunities pass you by, waiting for a perfect deal that doesn't exist. Venture will always be about taking risks and putting your neck out there.

    So, how do you know when to bet? The key is to find balance.

    The wrong approach is to hold yourself and your team to strict investment quotas per quarter or year. A better approach is to set a range that incorporates the natural ebbs and flows of randomness, and to discuss expectations with your team and limited partners. Running scenarios against your portfolio size and investment period will help you understand the clumpiness expected in your own model.

    Understanding the randomness of opportunities will help you plan smarter. Steady investing, rather than pursuing the best companies when they actually are ready for investments, will ensure sub-par investing and returns. It will cause you to miss out on excellent deals—don't make that mistake.


  • 7 absolutely important questions to ask before investing

    Adhil Shetty

    Investing in the right instrument is what an investor vies for. After all, it is his hard earned money that he wants to multiply along with ensuring a financial stability for his golden years and difficult times. Saving is a key to any kind of investment, but merely saving would not guide you through uncertain time. To be a successful investor, the saving needs to be invested in the right kind of instruments.

    For an effective investment strategy, it is very important to ask yourself these seven crucial questions.

    What is my objective?

    This is the most basic question to ask before you begin any kind of investing. Like any other work, you should ask yourself why you are investing. You should be clear about your objective. Is your investment for creation of wealth, for income flow in retirement, for helping you buy an asset, or something else? Once decided, you will start developing an idea of how far out in time this objective is, how much money you need to fulfill it, and what kind of challenges your current income poses in achieving this objective. Once you see the contours of the objective, you will identify it as short-term, mid-term or long-term investment goals. It will lead you to further questions as below.

    What is my investment tenure?

    Just as your investments should have an objective, they will also have a due date. This is also referred to as the “investment horizon”. This would decide the tenure of the investment. For example, your child’s marriage will be due in approximately 15 years. Your goal would lead you to invest accordingly for a predetermined tenure to accomplish it successfully. This tenure should be evaluated from time to time and the investment should be altered accordingly. This would mean that the tenure of any investment should be such that you can avail them as per your objectives set.

    What is my capacity for monthly contribution?

    You should ask yourself about the amount that can be separated from your income towards investment. This would take you to next question of whether you will go for a lump sum payment or monthly contribution towards the investment. You should be careful and realistic while deciding on this amount and allow your money to flourish gradually. You are the best judge of your own resources as well as your investment horizon. While lump sums can useful for equity investors during market slumps, a fixed monthly contribution can provide the advantage of rupee cost averaging.

    What are the risks?

    You must ask yourself if you prefer risks or are averse to them as an investor. Risks could be of many kinds, emanating from markets, inflation, returns, mis-selling, interest rates, currency fluctuation, and so on. There’s rarely such a thing as a risk-free investment, and even the most reassuring investment carries risks. For example, equity mutual funds carry market risks which can erode your wealth in the short term. Endowment insurance plans carry returns risks where you may achieve returns less than the prevailing inflation rate. Debt mutual funds react to interest rate movements. You must examine the investment risks thoroughly before getting in.

    Is this investment tax efficient?

    You should ask about the tax efficiency of your investment. Returns from most investments are taxed as per various norms, and you should question what your post-tax returns will be. For example, a fixed deposit offers you 7% per annum, but if you’re in the 30% tax slab, your post-tax returns would be 4.9%, which is poor. You should consider instruments that have lower tax incidence. For example, for long-term debt investing, Public Provident Fund is your best option since the investment is completely tax-free. Gains from equity investments whose tenure is longer than one year are tax exempt. If you want to save tax under Section 80 C and earn market-linked returns, you can choose an Equity Linked Saving Schemes (ELSS), which also provides tax-free returns. The more tax-efficient your investment is, the faster you can achieve your objective.

    What commission & charges am I paying?

    There’s always a relationship manager or sales agent trying to hard-sell you an investment option. You as the investor have a right to know what they will earn when you sign the dotted line. Never be rushed into providing your signature. Several forms of investment carry charges. You should ask what these charges are going to be. You should know what part of your contribution will be used to pay these charges and commission, and what your absolute returns net of these costs will be.

    How can I exit this investment?

    Before you sign the dotted line, ask how you can exit an investment. You may need to exit an investment for many reasons. You may be in short-term need of money; you are not happy with the instrument; you have found a better instrument, and so on. The point is, your money should be available to you when you need it. Often, investments have lock-in periods, exit loads, withdrawal limits etc. You should have an absolute understanding of how and when you can leave your investment, and avoid rude surprises at the time of need.

    Lastly, it’s not enough to take the verbal assurance of the person selling you an investment option. Often, investors are misled about returns, charges, lock-ins etc. by sales persons looking to make a quick buck. It’s your right to know these things in writing. Armed with these questions, you’ll surely make the best investment choice for yourself and reap satisfying returns.


  • After spending several years fighting with creditors, you decided to file for bankruptcy. You never thought to find out how long bankruptcy can affect your credit score. And now that your credit score and confidence have taken a hit, you feel hopeless. But don’t fret because there’s a light at the end of the funnel. Keep reading to discover how to start rebuilding your financial life.

    Ways to Recover From Bankruptcy

    1. Shift your mindset

    If you’re going to pick up the pieces and rebuild, a mindset shift is paramount. It’s normal to feel like a failure. But the goal is to focus on getting to the root of the problem so you can move forward.

    2. Create a spending plan

    Once you’re committed to improving your financial situation, create a budget. A few factors to keep in mind:

    Expenses should always be lower than income. If not, trim unnecessary expenses.

    Filing for bankruptcy should have alleviated some of those debt payments.  So, use the extra money to pay off other debts and start saving.

    Always be realistic with your expenses and income or you’re setting yourself up for failure.

    3. Build a cushion

    Each time you get paid, it’s important to set aside a part of your income into a savings account. As the balance builds, you’ll have an even greater cushion to fall back on if a financial emergency arises. Even better, you won’t have to rely on debt to get by or put yourself at risk of falling back into the same trap that led to the initial bankruptcy.

    4. Start rebuilding credit

    Are you thinking that filing for bankruptcy bans you from the credit world for several years? Think again. The easiest way to start rebuilding credit is by using credit responsibly. There are lenders that will give you a second chance without charging a fortune in interest. But it’s usually in the form of a secured credit card or loan product.

    Both need a deposit for collateral in the event you default. Start with your financial institution when researching options. They may be more willing to approve you on the strength of your positive account history. But be sure to keep your balances low to derive the greatest benefit.

    You could also become an authorized user on some else’s credit card to start rebuilding credit. You’ll benefit from positive account activity without being liable for the debt.

    Lastly, don’t forget to see investigate chexsystems to see if have an account listed. It may have been removed but if it hasn’t, now is the time to take care of it.

    5. Avoid late payments at all costs

    Payment history accounts for a whopping 35 percent of your credit score. In fact, one late payment on a credit card or installment account can tank your credit score by up to 100 points. Even worse, the negative mark will remain on your credit report for seven years. So, if you’re serious about rebuilding your credit score post-bankruptcy, you can’t afford to let accounts slip through the cracks.

    Instead, use your budget to stay on top of your expenses and due dates. You may also want to take it a step further by automating payments to avoid missing any due dates. And if you know you’re going to be short on funds, call the creditor in advance to set up a payment arrangement.

    6. Keep an eye on your credit report

    When was the last time you checked your credit report? The thought of taking a peek may be frightening. But your report could contain material errors that are dragging down your credit score. In fact, one in five credit reports contain errors. So, visit AnnualCreditReport.com to retrieve your free copy and dispute any mistakes.


  • 9 smart things to buy as an investment in your future

    Making sure you have enough wealth through old age used to be simpler. The idea behind pensions was that your employer would guarantee you a set payout once you retired and handle the investing decisions required to grow the money you would eventually receive.

    But the pension safety net is full of holes. For one, fewer and fewer employees have access to them: The proportion of private workers covered by them fell from 38% in 1980 to just 20% in 2008. And even if you are lucky enough to have a pension, there's no guarantee you'll actually get the funds at retirement age: That's because unrealistic expectations on investment returns have emptied the reserves of the federal program protecting pensions from losses.

    With pensions shrinking, the 401(k) has become the preferred investment vehicle of choice: It puts the onus of retirement savings equally on both the employer and employee (assuming matching contributions); and leaves investing decisions to the employer. 401(k) s really took off about a decade ago, when the Pension Protection Act of 2006 allowed companies to "automatically enroll employees in 401(k) plans, and offer target-date funds as a default option," LearnVest reports.

    Of course, retirement accounts like 401(k) s are just one way to invest, and if you are already saving the recommended 12% to 22% of your income for your golden years, you might be looking for other ways to grow your wealth — through smart investments. Even if you just have an extra $100 or $1,000 lying around, it's a good idea to harness that cash right away.

    "Investing is important because it lets you put your money to work," financial advisor Douglas Boneparth of Bone Fide Wealth said in an interview. "By assuming a certain level of risk, you have the opportunity to earn a reward greater then what simply putting your money in the bank can do. Investing is fundamental to growing your wealth over the long term."

    Mic consulted investment professionals to come up with nine investment ideas that will help you feel more financially secure — with explanations about how to start investing in each.

    1. Stocks

    No matter what your current financial position, you should be invested in stocks — though not necessarily individual ones, due to their price volatility. A great way to get the high returns of stocks, while minimizing risk, is to invest in a low-cost, diversified index fund like the Vanguard S&P 500. Or you could buy an exchange traded fund that tracks an index, such as the SPDR S&P 500 ETF.

    The chart above shows how much faster your money can grow by investing in an S&P 500 index fund — versus safe-but-low-return Treasury bonds. You can more about funds further below.

    There are never-ending debates about how how much of your investment portfolio you should have in stocks at a given moment. One rule of thumb says it should be 100 minus your age — so if you're 25, you should actually have 75% of your portfolio in stocks. If that sounds like a lot, consider that the Nobel-prize-winning economist Robert Shiller said in May that the market could go up 50% more before there's a significant market downturn.

    If you do opt for individual stocks, pay attention to three key considerations: diversification, price-to-earnings ratios and your risk-adjusted return (or Sharpe ratio). The goal is to maximize your returns while minimizing risk.

    How to invest: Outside of a retirement account, you can open up an account at an online brokerage. NerdWallet advises picking a broker with low fees and/or low account minimums — here is their list of best brokers for beginners. Some, like TD Ameritrade and OptionsHouse, require no minimum deposit. Generally, you can expect to pay $5 to $10 per stock trade depending on the broker, but there are also free services like Robinhood or LOYAL3.

    2. TIPS and other bonds

    Bonds come in many flavors, from ultra-safe Treasuries backed by the U.S. government to somewhat riskier corporate bonds issued by companies. Unlike stocks, which give you a small stake in a company, bonds are like loans or IOUs — and you are effectively the lender. One particular type of government bond, Treasury Inflation Protected Securities or TIPS, actually protects your spending power by adjusting in value based on consumer price inflation.

    Most people buy bonds to offset the risk of their stock investments since bond prices tend to hold steadier in good times and bad. "Bonds by their very nature are designed to be boring," MarketWatch says. "That's their beauty."

    Stock prices can change significantly throughout any given trading day. That doesn't typically happen with bonds — you're in it for the long haul. Nonetheless, their returns are still quite respectable: Since 1926, bonds have surged an average of 5% to 6% per year on average, versus the 10% for stocks, CNNMoney notes.

    Certain bond returns also have the benefit of being tax free: "Interest on municipal bonds is tax-free on the federal level," the Balance notes, "and, for investors who own a municipal bond issued by the state in which they reside, on the state level as well. In addition, the income from U.S. Treasuries is tax-free on the state and local levels."

    How to invest: Open up a brokerage account, and then decide if there are individual bonds you'd like to purchase, or if there's a larger bond fund that lets you invest in multiple bonds at once. Kiplinger's recommends a few bond funds, including Vanguard Short-Term Investment Grade Investor and Vanguard Limited-Term Tax-Exempt Investor in part because of their low investment fees. You can buy TIPS directly from the US Treasury.

    3. Passive funds and ETFs

    Again, if you don't like the idea of picking individual stocks, you can buy passive products that cover entire sectors, or even entire indices. These are called index funds or ETFs. Because these aren't actively managed, they tend to cost less than funds with more human involvement. And some so-called "balanced funds" actually include a mix of stocks and bonds.

    The main difference between ETFs and more traditional funds is that ETFs trade like stocks, with intraday movements; while index funds and other mutual funds are priced once a day, after markets close.

    ETFs have become so cheap and popular that there are now more of them than individual stocks. And whereas many mutual funds require a minimum purchase of $500 to $3000, you can easily invest in ETFs for less than $100 in an initial investment. But while ETFs require less money to buy, they may cost more in terms of expenses: "Of the more than 1,900 available ETFs, expense ratios ranged from about 0.10% to 1.25%," Investopedia notes. "By comparison, the lowest [mutual] fund fees range from .01% to more than 10% per year for other funds." So be sure to check expenses before you buy.

    How to invest: Investing in ETFs is similar to investing in stocks, if not easier. If you'd like to bet on social media stocks, there's an ETF for that — the Global X Social Media ETF. Just log into your brokerage, find the ETF you want to purchase, and buy or sell it; no minimum investment is required. To invest in a mutual fund, you generally need to open an account with the company that offers it, such as Vanguard or T. Rowe Price. Just remember — as soon as you are betting on one industry, instead of the broader market, you lose the protection of diversification. That's a reason to bet only your "play" money.

    4. Life insurance

    First, a big warning: The life insurance industry is plagued with misleading salesmanship and scams. That's a big reason to do your homework and ask lots of questions before buying in. That said, getting insurance as you get older — and especially after you have kids — can be a smart idea.

    One kind of life insurance actually lets you create an investment account with part of the money you've paid in to the account: Permanent or whole life insurance allows you to borrow against the value of your policy, and even set up an investment account — in addition to paying out a death benefit. "It's a personal loan from an insurance company, using the life insurance cash value as collateral," finance writer Michael Kitces explains. Instead of having to pay back a bank, you pay yourself and your heirs back.

    But there's risk involved here, because you're still in debt: "Even if the net borrowing cost is low because the cash value continues to appreciate, that’s still growth that the investor might have enjoyed for personal use, if the loan was never taken out in the first place," he says. What's more, fees and commissions make it a more costly investment than stocks or bonds.

    A second kind of life insurance, known as term life insurance, doesn't let you create an investment account with the funds but does give your heirs a great return on the money you pay for it. Using this example from Investopedia, if you buy a term life insurance policy at age 30, you could get a 20-year term policy with a death benefit of $1 million for $480 per year. If you die at age 49 after paying premiums for 19 years, your beneficiaries will receive $1 million tax-free — even though you only paid out $9,120.

    How to invest: All the major insurance companies offer both term and permanent life insurance.

    5. Bitcoin and other cryptocurrencies

    There are intense arguments being had across the investment community about investing in bitcoin and its sister currencies like ether, traded over the platform Ethereum. But if your risk appetite is large enough (namely, if you can stand to lose a lot of money), you may want to consider cryptocurrencies.

    Assets like bitcoin, ether and litecoin have seen explosive price growth recently. Nothing like them has ever come along before, and their adoption only continues to increase. However, they remain extremely volatile, and there can be regular "flash crashes" in their value.

    Mic recommends not investing any more money in cryptocurrencies than you are willing to lose, as some investors have occasionally lost all their money. One advantage of investing in cryptocurrencies, however, is that you can purchase fractions instead of entire units, which for bitcoin have been as high as $2,000 recently. That means you could spend as little as $5 on 1/400th of a bitcoin — which shouldn't make much of a dent in your retirement savings.

    How to invest: Coinbase, a simple platform that allows you to link your debit or credit card account, is one of the largest bitcoin-buying platforms. Other popular platforms within the crypto world are Kraken, which lets you buy a wide range of currencies; and Gemini.

    6. Real estate

    Like stocks, real estate prices have seen a rapid rise since the end of the financial crisis. And there is no sign that this trend will stop — for instance, Miami just posted its best ever month of May for single-family homes, "as total home sales, median prices, dollar volume, traditional sales and luxury transactions surged," according to the Miami Association of Realtors.

    Here's the Case-Shiller home price chart for the U.S. as a whole, representing major cities: It's a composite index that shows if home prices are rising or falling in 20 top cities. Since 2012, the index has showed steady growth.

    But rising prices doesn't mean that now is the right time to get into the real estate market. In fact, it could mean you should hold off, as prices in some markets, like New York and San Francisco, are considered extremely expensive compared with history. What's more, a shortage of homes on the market may be artificially inflating prices.

    Buying a home can be risky and costly, and people may overestimate how much their homes will grow in value over the years, as Mic has previously reported. And unlike stocks and bonds, which you can sell at any time, it can take months to sell a home, which can tie up your funds indefinitely. If buying will result in higher monthly costs than renting, you may want to wait until the economics are in your favor.

    How to invest: The obvious answer, of course, is to buy property in an area that is expected to see demand grow. But what if you can't afford a down payment right now? New platforms have emerged to allow folks with less cash to take advantage of the property market boom without becoming a homeowner. Fundrise is one option. It allows you to become a real estate investor with as little as $1,000. You can also invest in real estate investment trusts, or REITs, which operate commercial real estate like malls. These are usually public companies with their own stock tickers that you can invest in through your brokerage account. The largest REIT is Simon Property Group. Lastly, there are real estate ETFs that track real estate stocks; a popular one is the Vanguard REIT ETF. (Again, even in ETF form, these are risky products, and you should be investing only that money you can afford to lose.)

    7. Classes that give you in-demand skills

    It's often said that the best investment you can make is in yourself. There's no better way to act on this than by upgrading your education with an advanced degree or specialized certificate that will keep your skills fresh and open up new career possibilities. There are also many classes you can take on the fly.

    Some of the most popular courses to take right now are in coding languages like Python, Java or Ruby on Rails. The demand has led to dozens of coding academies popping up around the country. But there are several other growing industries that you can jump into in a matter of weeks with the right certificate, like fitness instruction or even cannabis management.

    How to invest: There are loads of courses you can take from almost anywhere in the world that will provide you with new training or a new degree in a skill that you can then use to further advance your career. Many are available online on sites like Coursera and some are even free.

    8. Shares in a privately-held startup

    In the dot-com boom of the late '90s and early 2000s, going public was the thing to do: It was a sign that your company had made the big time and was ready to handle the responsibility of being a public company. Fast-forward around two decades later and going public is now viewed by some as a sign that a company has run out of private backers and needs more cash from "dumb money." As a result, large swaths of the general public have missed out on the spectacular growth of companies like Airbnb, Uber and Slack, which have all remained private.

    But a handful of platforms have come along to take advantage of the Jumpstart Our Business Startups (JOBS) Act, passed in 2012 to allow non-accredited investors (read: people with a net worth less than $1 million) to invest in private companies and startups. Equity crowdfunding companies will allow you to invest in startups and take advantage of the startup boom that has been quietly but strikingly taking place in the U.S. since the recession.

    Some caveats: You'll want to watch out for low quality-control, as this is a new and highly risky space. And unless you make more than six figures, you'll likely be limited to no more than $2,200 in annual investments of this type, per SEC rules — that are there to protect you.

    How to invest: SeedInvest lets anyone invest in companies that have been vetted by the site as financially stable with a favorable upside. The company charges a 2% non-refundable processing fee, up to $300 per investment, in return for providing a menu of fast-growing startups. Other companies offering a similar service include, NextSeed, WeFunder, and IndieGogo's First Democracy VC.

    9. A video camera

    Confused? Don't be. Some of the most successful entrepreneurs these days can be found on YouTube. And it's not just the ones starring in their own self-produced comedy videos. Musicians, makeup artists and even magicians have all developed channels with hundreds of thousands of followers who want to learn more about their skills.

    To get started, all you need is a video camera. Inexpensive models like the Nikon Coolpix S7000 and Canon PowerShot ELPH 330, both of which are recommended by Vlogger Pro, sell for less than $200, making them a relatively small investment with a potentially big payoff.

    5-Minute Crafts have nearly 4 million subscribers. If you think you're handy yourself, you could create a similar channel and start raking in the bucks. According to MonetizePros, current RPM (revenue per 1,000 views) rates range from $0.50 to $5.00 in exchange for running ads on your videos. So if you make a video with 1 million views that works out to as much as $5,000. Gain a following and you can earn extra money through product placement or licensing your videos to partners.

    How to invest: As of April 6, YouTube channels with fewer than 10,000 views cannot run ads on their videos. If you've made it past this threshold, YouTube has simple instructions for setting up an AdSense account that you can link to your bank account. Once you've really established a following, you can work with YouTube directly to further develop your channel.