If you want to make a fortune, investing is one of the best places to do it. Starting with $1,000 may not seem like much, but over time you can grow your money and build a better financial future for yourself and your loved ones. In fact, becoming a new investor has never been cheaper or easier. There are many great ways to get started.
Some of the best ways to invest $1,000 can actually boost your bankroll quickly. You may be able to invest in assets.
Here are 9 ways to invest $1,000 and what’s important to know about them.
1. Buy an S&P 500 index fund
At the top of the list is an index fund purchase based on the Standard & Poor’s 500 Index, a collection of about 500 of America’s most successful companies. The index has returned an average of about 10% over time, allowing him to double his wealth in just seven years.
For new investors, it is a great option as it offers instant diversification which means less risk and allows you to own some of the best companies in the world. In fact, legendary investor Warren Buffett suggests that most investors are best off buying and holding his S&P 500 fund.
2. Purchase a portion of 5 shares
If you want to add a little spice to your portfolio and extend your investment horizon, buy our collection of the five stocks we researched. If not, you’re better off with the S&P 500 index fund. A collection of 5 stocks can also be significantly more volatile than an index fund, but that’s part of the price you invest in individual stocks.
With one of the best brokers for fractional shares, you don’t even have to worry about having enough money to buy a full share of each stock. And you might be able to get a little extra, so check out the best brokerage bonuses for new money.
3. Add to IRA
Putting money into a retirement account offers one of the highest potential returns. If you choose a traditional IRA, you can deduct the income tax you pay on her $1,000 if you meet the income limit. Plus, you can defer taxes on your profits for up to decades.
A few bonuses can also sweeten things up. This strategy can be layered with the account opening bonuses above. Also, if your income is less than her $43,500 (2023) and you jointly file taxes with your spouse or file her $21,750 as an individual, you may be able to take advantage of her lesser-known Savers credit. I have. If she earns above these levels, she is still eligible for 10% or 20% credit depending on her income.
This is a big risk-free return for you. And this is one of the best and easiest returns you’ll find.
4. Get a match on the 401(k)
If you have an employer-sponsored retirement account, such as a 401(k) or 403(b), make sure your employer matches the amount you contributed to the account. For example, some companies offset her 50% of donations to his 4% of salary. So if you put in 8% of your salary, the company will immediately give you 4%. This “free money” is one of the easiest money ever made, and it makes sense to do so.
Using this strategy involves more than just depositing money into your account, unlike the other strategies we do here. Instead, you should defer money from your paycheck. But as an added bonus, you can also redeem Savers Credits here. Therefore, depending on his income, it is possible for him to generate 100% return without risk.
5. Get a robo-advisor to invest
Worried about investing money yourself? Let our robo-advisors do all the heavy lifting for you. Robo-advisors allow you to choose your portfolio when you need your risk tolerance and money, and use the same principles that human advisors use.
The best robo-advisors also offer calculators and other tools to help you understand how fast your money can grow, and offer solid cash management accounts with lots of features. You don’t need to get started and it only takes a few minutes to open an account.
6. Pay off credit card or other loans
Of all the investments on this list, the one with the absolute safest return is paying off debt, especially if it’s high interest credit card debt. 25% or 30% on the card is money that might otherwise be in your pocket. In fact, it makes sense to prioritize paying off that high-interest debt as much as possible before investing.
7. Be super safe with a high-yield savings account
If I need access to money within a few years, I don’t want to be tied to major investments such as stocks that can drop significantly when I need the money. Instead, choose a very secure option such as a high-yield savings account. These accounts have provided some of the best returns in years, making it easy to find the top yields in the country.
High-yield savings accounts are offered by most online banks, giving you instant access to cash when you need it.
8. Build a passive business
Yes, even $1,000 could start a passive business. Especially if you put a lot of “sweat equity” (i.e., labor) into doing it. Find a niche you love, then set up a website or create a course on the topic where you are a subject matter expert. The capital needs of many passive businesses can be lower with upfront investment.
There are many options for passive businesses such as making micro-loans through crowdfunding platforms or investing in real estate.
9. Open a 529 account
If you or a loved one may one day go to college, depositing money in a 529 account can help your 529 account grow while keeping future education costs more affordable. Money withdrawn from your account and used for eligible educational expenses is tax-free. This is an attractive prospect for parents who have to pay for their children’s education.
Additionally, the SECURE Act 2.0 of 2022 will relax the ban on donations to 529 accounts. From 2024, all funds in your account can be carried forward to your Roth IRA without penalty.
Investing $1,000 may be just the beginning of your investment career, but over time, understanding the options available to you and how to make that money really work for you can make it a worthwhile investment. Make it meaningful. Over time you can add to your account and build real wealth for yourself and your family.
Editorial Disclaimer: All investors are advised to conduct their own research on investment strategies before making any investment decision. Further, investors should be aware that past investment product performance is no guarantee of future price appreciation.