If you’ve just gotten your first $1,000 that’s free to invest, you might be freaking out a little bit. What are you going to do with that money? And how are you going to keep it growing so that you can continue to invest more for your future?
Well, $1,000 is a great start, but it’s not a ton of money. That means you can’t spread it out into too many different options. But you can prioritize the best ways to invest that thousand bucks. Here are 10 of the best ways to invest your first $1,000.
|Investment Type||Best For|
|Paying off debt||Those with high-interest debt|
|High-yield savings account||Emergency fund|
|Tax-advantaged account||Beginner investing|
|Stocks||Having control over where your money goes|
|Real estate||Alternative investment|
|CD||Those who don't need the money right away|
|Treasury security||Safe investment to balance risk|
|Use a Micro-Savings App to Both Save and Invest||Those who want to invest while shopping|
Table of Contents:
1. Pay Off Debt
First, if you have high-interest debt hanging around, you’re likely best off putting your money towards that. If you’re paying 15% or more interest, you won’t likely be able to put your money towards an investment that out-earns that. So it’s best to pay off that debt. The general rule of thumb here is that you first put enough money into an employer-sponsored account to get any matching option available. Then you put your money towards high-interest debt until that’s paid off. Once that’s done, you can move on to some of these other options.
2. Use a High-Yield Savings Account
If you don’t have any money saved for an emergency yet, put your $1,000 into a high-yield savings account to be used for emergencies. This keeps you from going into more debt if an emergency does arise, so it’s definitely a good idea. Look for a savings account that has little to no ongoing fees and as high an APY as possible. Some great options include Chime, CIT Bank, Ally Bank, and Capital One 360. Just do your research to find the best deal when you open your account.
Deal of the Day: Chase is now offering a $200 cash bonus when opening a Total Checking Account. No minimum deposit and all deposits are FDIC insured up to the $250,000 per depositor maximum.
Watch: A 7-Step Guide to Building Your Ultimate Emergency Fund
3. Put It Into a Tax-Advantaged Account
If you don’t have an employer-sponsored retirement plan, or if you aren’t able to put this $1,000 in there, you should consider making your investment through an IRA. Tax-advantaged investment accounts like these can really boost that amount and grow your money over time. Luckily, some of the options below, including some robo advisors, allow you to invest through an IRA, so you can get both good returns on your investment and tax advantages.
4. Try Your Hand At Investing In Stocks
You definitely don’t want to invest your whole portfolio over time in stocks. But if you’re interested in trying your hand at stock investing, try it through a solid platform like Ally Invest, E*TRADE, or TD Ameritrade. These platforms let you make trades on your own, so you can see what it’s like to build your own custom investment portfolio. You can also opt for a semi-robo advisor like M1 Finance. This one is free to use and lets you put together your own portfolio of ETFs, which tend to be more stable than individual stocks but still gives you the feel for putting together your own investments.
But if you don’t know what you’re doing, or just don’t want to deal with the time and energy it takes to pick good stocks, fear not. One of the best ways to have your money managed for you is by working with a Certified Financial Planner. The problem is, they’re hard to find (good ones, at least).
Because of this, I recommend you use a service called Facet Wealth. Facet Wealth will help you find a CFP that meets your financial goals. You’ll have a single point of contact (no call centers, thank you), and someone who truly gets what you’re after financially. You can meet with them virtually too, via a video conference. Read more at our Facet Wealth review.
5. Start a Robo Advisor Account
If you want a bit more handholding, or to be totally hands off, with this starter investment, consider using a robo advisor like Betterment or Wealthfront. With a dollar amount on the small side like this, Betterment is probably your best bet. It’ll let you set your investment preferences and forget about managing your account on a day-to-day basis. And if you want a similar investing approach but want to put your $1,000 towards a good cause, try Wealthsimple, a robo advisor with handcrafted portfolios that support companies that line up with your values.
6. Consider Real Estate
If you have $1,000 but generally have a high net worth and high salary, you might qualify to invest in a real estate crowdfunding platform like Realty Mogul. Or you could invest in Fundrise, even if you don’t meet these other qualifications. The minimum investment for Fundrise is $500, so you can get started with just your $1,000 if you’d like.
Another platform to consider is Streitwise. You can also invest with as little as $1,000, and you don’t need to have either a high net worth or a high income. The fund is currently offering dividends on your investment in the range of 8% to 9%, as well as the opportunity to participate in capital gains. Read more in our Streitwise review.
7. Move Towards P2P Lending
Again, if you meet the income and net worth qualifications for peer-to-peer lending, you could potentially invest your money with a platform like Prosper or Lending Club. Some of these companies, like Lending Club, require a minimum $1,000 deposit, but you can still spread that money over several different loans to diversify your investment. The requirements for all P2P sites can be a bit different, so be sure you meet their minimum requirements before you count on investing here.
8. Use a CD For Mid-Term Savings
What if you want to put that $1,000 towards the start of some larger savings goal for the medium-term? Like buying a house or a car? In this case, you might consider putting it into a CD. If you know you won’t need it to be liquid for a set period of time, a CD can get you good return on your investment without risking your capital like you will with many investing opportunities.
Read more: Best CD Rates
9. Buy a Treasury Security
If you have a higher income tax rate, you might get a better deal from a Treasury security versus a CD. They do tend to have slightly lower rates, but their earnings are exempt from state and local taxes. Before you decide to lock your money up in either option, be sure you do the math to get the best bang for your buck.
10. Use a Micro-Savings App to Both Save and Invest
Did you know that you don’t even need to wait to accumulate $1,000 to begin investing? Naturally, there’s more you can do with your portfolio if you have that kind of money. But if you have been having difficulty accumulating it, or you have at least $1,000 and want an automated system to increase it, Stash Invest needs to be on your radar.
Stash Invest provides you with a debit card. You can set the card to use “round-ups” to make regular contributions to your investment account. For example, if you make a purchase for $9.15, your account will be charged the full $10, with $.85 going into your investment account. Multiply that by dozens of transactions per month, and you can easily see $20, $30, $40, or even $50 going into your investment account each month.
Stash Invest even makes investment recommendations for you. You’ll have the option to choose from more than 400 individual stocks and exchange traded funds. They provide you with a portfolio model that’s based on your risk tolerance, time horizon, and investment goals. They won’t manage the portfolio for you, but instead will guide you toward creating one that works for you. As much as anything else, Stash Invest is an excellent introduction to self-directed investing, both helping you to accumulate funds for investment, then gradually helping you get your feet wet with managing your own portfolio.
Start Keeping Track
Whatever you decide to do with that $1,000, be sure you keep the cycle going by keeping track of both your budget and your investments. One way to do this is with Personal Capital, a platform that lets you pull all of your investing and spending data together into a single place. With it, you can watch your original investment grow, but you can also manage your budget so you can live on less than you earn and invest the rest.
How much interest will I earn on $1k?
To determine the interest you’ll earn on $1k, multiple 1,000 by the rate of return you expect. So, for example, if you are expecting a modest 6% rate of return, you’d earn $60 in interest by the end of the year (1,000 x .06 = 60).
How should I invest $1k to make 100k?
To turn $1k into $100k, you’re expecting to 100x your investment. The best way to do this is to start with $1k and continue to invest at a regular interval over time. For example, if you started with $1,000 and invested $200 per month, every month, for 20 years and earned a modest rate of return of 6.5% (compounded monthly), you’d end up with just over $100k.
How can I invest $1k wisely?
To invest $1k wisely, you should open an account with a robo advisor and let them do the work for you. $1k isn’t enough to invest in most mutual funds or even some index funds, but it is enough to start investing with a robo advisor like Wealthfront. This way, your investment will be broadly-diversified and actively managed on your behalf.
What’s the best way to invest $1k short term?
The best way to invest $1k in the short-term is to put it into an ETF or index fund that captures a wide scope of the total stock market (like VTI for instance). Most brokers will allow you to open an account with $1k, but you might have to search around for a fund that will let you buy in for $1k (many require a minimum investment of $2,500 for example). Alternatively, you can put the $1k in a robo advisor account and let them manage it for you.
Having $1k to invest is more than many people have. In fact, most Americans don’t have $1,000 to cover an emergency without going into debt. So consider yourself lucky in that sense. That’s why you want to make sure it lasts and it’s invested wisely. Review our advice above, choose a safe, short-term investment, and keep a close eye on it. Your $1,000 investment isn’t going to get you to retirement by itself, but it can serve as a wonderful safety fund and a foundation for a larger portfolio.
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