When people first look into how to invest $1,000, they quickly learn the options are not as straightforward as many of us think they should be.
While the investment world may seem a little muddled at first, the good news is that there are many ways to invest 1000 dollars that allow anyone to get started on their investment journey.
Ways to Invest $1,000
You could put your money in your local bricks and mortar bank, and it will be safe, but it will get less than .05% interest. The good news is that there are many options for high yield savings accounts online that can get more than 1% interest.
I know that the rates in this low-interest environment do not sound super exciting, but we are talking about money secured by the bank’s insurance policy.
Betterment is my favorite of the various robo-advisors now available.
Betterment invests for you by having you take a short survey (less than 5 minutes) and assessing how much risk you are willing to take. From there on out, the service invests for you, even avoiding taxes and trading fees. You can start an account with no minimum deposit.
Fundrise allows you to invest in real estate without having to manage the property.
Instead of buying, fixing up, reselling, or renting a property, Fundrise allows you to deposit your money into a real estate investment trust.
Once there, the trust manager handles the investments and you collect interest. It is a simple way to diversify your investing into real estate and away from stocks.
Groups of Stocks
You could go out and watch a ton of CNBC, buy a bunch of investing books, learn all you can, and then invest. OR, you could hop over to M1 Finance and purchase groups of stocks that are already picked by experts in a specific industry of the stock market.
Think of it as an expert in one specific industry, picking the best companies. Each “Pie” has a group of stocks that you invest in simultaneously. What makes this great is that you can invest in all the stocks with no fees.
If you tried to invest in each stock individually with other brokerages, it would cost you at least $150. That is some serious savings, and you get to diversify.
You can invest in a Pie with as little as $100 and $500 if you are doing a retirement account. Once you are in, there are no additional fees, even when you make another trade (cashing out your Pie). You can see a full history of each Pie and its performance over time, giving some idea about how good of a group of stocks you are purchasing.
It has become incredibly easy to start up an online account with a discount brokerage. You can sign up, get your deposit into the account, and start trading.
As I mentioned above, exchange traded funds (ETFs) are traded on the market, just like stocks, but invest in a large number of investments at one time. You can check how that fund has been doing over one year, five years, ten years, and more.
If you are just getting started in ETFs and want to keep your fees low, TD Ameritrade will be the best brokerage for you. They allow you to invest in more than 100 different ETFs with no fees. That’s right, you choose any of their specified fee-free ETFs and put as much as you want in there with no fees. It is a great way to get your feet wet, trading ETFs.
If you are not contributing to an employer retirement account and have a company match, you should always start investing there.
Not only is the match instant profit, your employer considers this to be part of your compensation when they hire you.
If you do not have this option, then there are tons of great places to open a Roth IRA. With a Roth IRA, you invest your money after you have paid taxes on it.
The money then grows tax-free, and when you take that money out at retirement, you do not have to pay any additional taxes on it. So whatever taxes you are paying right now on your income are all you will ever pay, no matter how much it grows in the future.
If you are a small business owner, you can do a SEP IRA and put yourself in a position to start putting significant amounts of money into your retirement once the business starts producing larger profits.
Money for SEP IRAs goes in pre-tax, so you get to deduct them from your taxes now and then pay taxes on them when you withdraw them. Like the Roth, there are many places to open a SEP IRA, and it is a matter of personal preference for choosing which one is best for your specific needs.
Charitable giving is not an investment in your long term finances but our society. Whether you choose to invest a portion of your $1000 investment in a local church or some other charity, you will find that the exercise of charitable giving does something in you.
Being able to think outside of ourselves gives us a better perspective on life and what is important. Giving also pushes us to do better with the other money that we do invest.
Certificate of Deposit
A certificate of deposit (CD for short) works like a savings account, but you lock your money in for a specified period. This period can be as little as six months or as much as ten years. The longer you lock that money in, the higher the interest rate.
Like their savings account cousins, CDs are at all-time lows due to the Federal reserve’s low-interest environment. Once again, the good news is that there are high yield online CD accounts that will get you a better interest rate than what you get from your local bank.
Peer to peer lending has become a big winner for many people. The industry has gone through some growing pains lately with the FEC getting involved, but I have continued to see significant returns from our investments.
Lending Club is the industry leader and has issued more than $20 Billion in loans. This data gives us tons of information on how to invest with Lending Club, and they are happy to share that information with you as you get your account started.
The sign-up process is straightforward, and you can invest in a single loan with as little as $25. If I were starting off and not sure about the whole process, I would start with an investment of $250.
At $25 each, you can invest in 10 different loans for diversification purposes. People who are investing in a lot of loans (100 or more) are seeing returns in the range of 8%-9% even after losing a couple of loans to default.
LendingClub and other P2P lending platforms have made it easy to invest and limit your risk in this type of investing.
Pay Off Debt
If you are carrying high-interest debt, then the best thing you can do is pay off that debt ASAP. This includes consumer debt, and any non-house debt you may have.
By clearing the debt out of your life, you can focus on getting your finances in order so that you can consistently invest $500 or more per month. That is where you can build some real wealth.
Invest in Your Knowledge
If there are skills you need to make yourself more marketable and increase your income every month, that is a fantastic place to invest your 1000 dollars. Whether through online courses, college courses, or trade school, all of these are great ways for you to expand your marketability.
Maybe you are looking for a new career and can start your training with a small investment. I know you can get your welder certificate from the tech schools in my state for less than $8000.
There is currently a shortage of 240,000 welders in the United States. In 30 weeks, you could have a job paying more than $50,000 a year with only a high school education and that 30-week training course. If you don’t have a better plan, you can work your way into as much as $100,000 per year as a welder with overtime.
Crypto is changing the way businesses verify the authenticity of items. It has become prevalent in countries where there are significant problems with counterfeit products.
The usefulness makes the coins valuable, and we have seen major run-ups in the price of the largest currencies. Where there is demand, there is an opportunity to make money.
However, understanding crypto comes with all the confusion of forex trading and new technology. Make sure you learn as much as you can before buying in.
I am using Coinbase for my crypto trading because they are based in the USA and have some oversight from our government.
How I Would Invest 1000 Dollars
So in any investment that I am going to undertake, I always look to minimize risk by diversifying the investments. For this example, I am going to assume we are ONLY investing the $1000 we have (no reoccurring deposits).
My investment of $1000 can be spread out among high, medium, and low-risk investments. Here is how I would break this down by account:
Amy and I give 10% of any money we make to our local church. Charitable giving is part of our faith tradition, and the money given to our church is well documented on how it is spent.
Fundrise is taking up half my scenario for investing $1,000. While I would not typically invest half my money in one place, the minimum to get into Fundrise is a $500 investment.
To get diversified as fast as possible, I want to have a sizeable amount of money outside of stocks. The Fundrise real estate investments get the best return, so I am willing to go this direction and put more money into my stock investing later.
Being able to allow someone else to do my investing for me and feel secure that my money is handled well is very appealing.
Betterment’s strategy of taking my risk tolerance and lettering their algorithms do the rest gives me the comfort to focus on areas where I have a much steeper learning curve. An investment of $200 is 20% of my portfolio and would have been larger if not for the minimum investment at Fundrise.
Speaking of learning curves, I am in the middle of learning how to pick individual stocks. Public gives me all the tools I need and free trades.
Their 100% app-based interface makes it all very easy and available 24/7. As I mentioned above, Public allows for fractional share investing. That means my $50 investment can be spread of many stocks while I learn how to make more significant investments over time.
Another area I have been testing is cryptocurrency. I have done relatively well picking stable coins for long term investment, but finding coins where I can day trade is appealing.
I am willing to invest $20 of this money to get better at this aspect of cryptotrading and may invest more if I don’t lose it all in the process.
Whenever I have a lump sum to invest, I always hold a bit back in a savings account to be ready when there is a deal.
You can come up with your mix based on your risk tolerance, but I like the makeup of this combination of accounts.
Final Thoughts on Investing $1,000
With any type of investing for the long term, the most important thing is that you get started right now. Whether you are 15 or 50, letting the power of compound interest work for you is the most important financial decision you can make.