Beginning an investment portfolio is a significant step, whether it’s with a million dollars or just starting $1,000. That first step is to get started, even if it involves a relatively small amount of money. Once you start the investment process, the combination of regular contributions plus investment returns will ensure a prosperous future.
You don’t need to wait until you have many thousands of dollars before taking the first step. Use these options to get started investing with as little as $1,000 today.
The great news is that there are plenty of ways you can invest $1,000. However, one last piece of advice is to consider if you want to actively or passively invest.
One of the reasons services like robo-advisors or fixed-income investments like bonds are popular is because they’re hands off; you just deposit your money and forget about it. In contrast, DIY investing in stocks and ETFs takes some more research and monitoring.
There isn’t a right answer here, and we believe anyone can learn how to research the market on their own. But it’s important to be honest with yourself and to choose an investing path that aligns with your goals and style.
One final idea for how to invest $1,000 is to use the money to learn a new skill. This isn’t a traditional investment by any means, but it could actually have the highest return out of any investment on this list.
For example, you can find quality online courses on marketplaces like Udemy for under $1,000. Courses cover popular topics like programming, graphic design, marketing, and statistics. But you can also learn languages, music, and more creative skills on Udemy as well. And some courses are incredibly specific, like courses on the Python programming language or advanced Microsoft Excel.
If the skills you develop help you land a higher-paying job, you can easily 100x the money you spent on a course. And even a single course can significantly spruce up a resume, provided you put in the time to complete the course and learn.
With inflation on the rise, many investors are turning to alternative assets instead of the stock market right now. And while it might surprise you, it’s possible to invest $1,000 in numerous types of alternative assets, even as a non-accredited investor.
Some popular alternative investing ideas and platforms include:
Artwork investing with a company like Masterworks
Investing in wine with companies like Vint and Vinovest
Investing in gold with apps like Vaulted.
Some investors get even more “out there” with their investments, dabbling in sports cards, NFTs, and cryptocurrencies.
Personally, I think it’s a better idea to build a nest egg of stocks and ETFs you plan on holding for the long-term before dabbling in alternative assets. This is because you can create income with assets like dividend stocks or ETFs, and these securities are often more liquid than alternative assets. However, $1,000 can easily get you started down the alternative asset road, so it’s worth considering.
While this isn’t exactly investing, using a high-yield savings account can be an excellent place to stash $1,000 if you need the money in the near future. This is because your money is easily accessible for when you need it soon, but it can still earn some meaningful interest.
The good news is that many mobile banks have also increased their interest rates. Some of the best savings accounts on the market right now include:
Aspiration: Lets you earn up to 5.00% APY on up to $10,000.
Capital One 360: Get 1.30% APY with Capital One’s fee-free savings account.
Current: Another online-only bank that currently pays 4% APY on up to $6,000.
Varo: With Varo, you start at 1.20% APY but can earn up to 5% APY on up to $5,000 if you receive direct deposits of at least $1,000 per month.
A high-yield savings account is an excellent option for your emergency fund or cash you need in the near future. But if you’re investing for the long-term, we suggest trying the other ideas in this article.
If you are a more conservative investor, you can invest in U.S. Treasury securities through Treasury Direct. They might be boring, but boring is sometimes good, especially if you want fixed-income. And you can invest in a variety of U.S. government securities with as little as $100.
Treasury investments available include:
Bills (maturities of less than one year)
Notes (maturities from two to 10 years)
Bonds (maturities of 30 years)
Treasury Inflation-Protected Securities, or TIPS (maturities of five, 10 or 30 years)
TIPS are particularly interesting because not only do they pay regular interest, but they also make periodic additions to your principal to cover inflation. The adjustments are based on upward changes in the Consumer Price Index (CPI). You can earn interest tax-deferred while owning them and tax-free if used for higher education.
Right now, I Bonds are an incredibly popular inflation-proof investment for this very reason. So if you’re trying to invest $1,000 and want to limit the impacts of inflation on your wealth, this is a great place to start.
I bet you never thought real estate was an option with only $1,000. However, there’s an investment product called a REIT (which stands for “real estate investment trust”). It’s similar to a mutual fund except, instead of stocks and bonds, the assets are income-producing real estate properties (office buildings, apartment buildings, single-family homes, etc.). Investors can invest in REITs and own and profit from real estate without the hassle of managing it.
And the great news is, many real estate crowdfunding sites have made REITs and individual real estate deals more accessible by moving online. These sites pool money together from investors to acquire income-generating real estate properties. As an investor, you can then generate returns through dividend payments and property appreciation.
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Fundrise is one of our favorite options for new investors because it has a $10 funding minimum and only charges 1% in annual fees. Investors earn through quarterly dividends, and historically, Fundrise has returned around 8-9% annually.
Groundfloor uses a different approach and lets you invest in real estate development loans. These are shorter-term investments than Fundrise, and there’s a $10 minimum investment requirement as well. Historically, Groundfloor says it returns over 10%, although investing in debt is slightly riskier than equity since borrowers can default.
It might not be obvious, but another excellent option for investing $1,000 is to tackle high-interest debt. Choosing to pay off debt instead of invest really depends on the interest rate of your debts. But for high-interest debts like a credit card or personal loan, eliminating debt as fast as possible is usually a smart move.
And there’s something to be said for the peace of mind you gain when becoming debt free. You can use your thousand dollars to work on your highest-interest debt and then work your way down to smaller debts. This is known as the avalanche method for paying off debt, and it helps you save money on interest payments in the long-run.
If you want a helping hand with investing $1,000, one of your best options is to use a robo-advisor. With robo-advisors, you outline your investing goals and the risk you’re comfortable with. From there, your robo-advisor constructs a portfolio of low-fee ETFs and bonds to match your goals and risk tolerance.
There are several advantages to robo-advisors. The first is that many are low-fee, so you’re not spending nearly as much in asset management fees as you would with a human financial advisor. Additionally, the best robo-advisors have low funding requirements, so $1,000 is more than enough to get started.
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Betterment and Wealthfront are two excellent ways to invest $1,000 you can consider. Both charge 0.25% in annual management fees for accounts with $1,000 and have similar portfolio options. Betterment has slightly more ESG investing choices, so you can invest in funds that value the environment and social causes. As for Wealthfront, it gives you a bit more customization options for your portfolios.M1 is also an excellent option if you want to avoid fees altogether. And its hybrid robo-advisor broker style also leaves plenty of customization options on the table for your portfolio.
With those considerations out of the way, it’s time to dive into some of the best ways to invest $1,000.
Stocks & ETFs
One of the simplest ways to invest $1,000 is to start investing with an online broker. These days, the top online brokers offer commission-free trading for stocks and ETFs. And if you’re brand new to investing, building a portfolio of low-fee ETFs is an excellent way to start out.
Online stock brokers also let you invest through a taxable account or through tax-advantaged accounts like an IRA. If you’re investing for retirement or the long-run, using these sorts of tax-advantaged retirement accounts makes sense, and the sooner you begin investing, the better.
Here are some of our favorite online brokers that offer taxable and tax-advantaged accounts:
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Brokers like Ally Invest and TD Ameritrade are excellent choices for beginners since both brokers have great customer service and let you invest in a variety of assets.
You can also use investment apps like Public if you prefer trading from your phone. And what’s nice about Public is that it offers fractional shares, so you can buy slices of shares of expensive companies where you’d normally be unable to. Plus, new Public members get a free stock for signing up that can be worth up to $300.