If you’re new to investing and don’t have a whole lot of money to start with, you’re probably having a hard time deciding how to proceed. But if you’re looking for ways to invest $1000 (or thereabouts), there are a number of smart options that are relatively safe and can help you grow your money so you have more to invest.
Of course, if you haven’t achieved two important basic signs of financial stability—paying off all your credit card balances each month and having emergency savings that can cover about 6 months’ of expenses—put your extra money toward these before investing (see the first entry on the list below if you need to build up some savings). This is especially true if you have high interest rates on credit card debt or are running high balances; you’re unlikely to earn more from investing than you’re paying in interest, so it makes more sense to pay off that debt first.
Once you’re ready to get started, here are a few practical ways to invest $1000.
How to Invest Your First $1000
- Open a high-yield savings account. This is a great move if you don’t yet have an emergency fund to cover 6 months of expenses. Unlike many other investment vehicles, it keeps your money completely liquid. While you won’t see huge returns, this is the safest way to invest because it’s FDIC insured (there’s no risk of losing money), and you earn more in interest than with a traditional savings account. Go to Google and do a little research on your options.
- Go in on an REIT or two. Real estate investment trusts (REITs) allow multiple people to put a relatively small amount of money in a single real estate investment. It’s one of many different ways to invest in real estate, and it’s highly accessible to those who don’t have a large sum to invest. As always, do some research before jumping in. Fundrise is probably the best-known site for investing in REITs.
- Try peer-to-peer lending. One of the simplest ways to invest $1000 is to lend money to people who need to borrow it and get paid back with interest. In most cases, you’ll be one lender among several contributing to the same loan. You can be cautious by limiting what you contribute to any one loan (to perhaps $100 or $200). Research P2P lending sites and choose one that thoroughly vets its borrowers. LendingClub is one reputable site for this type of investment activity.
- Invest in ETFs. Exchange traded funds (ETFs) are a good way to diversify your portfolio even when you only have $1000 to invest. They’re similar to mutual funds in that your money is invested in a variety of stocks, but they’re traded in shares like individual stocks, allowing you to buy smaller portions of the fund for greater diversification.
- Open a Roth IRA. This is a great investment vehicle, and it’s better suited to people in a lower tax bracket than a traditional IRA (which is more likely if you’re new to investing or starting out with $1000). There are many brokerages that allow you to open a Roth IRA with only $1000, but again, do some research before choosing one.
