Investing

How to Invest your First $1k

Investing your first $1,000 well can be the first step to future financial success. Follow our guide to learn the best ways to get started.

Editor's Note

You can trust the integrity of our balanced, independent financial advice. We may, however, receive compensation from the issuers of some products mentioned in this article. Opinions are the author's alone. This content has not been provided by, reviewed, approved or endorsed by any advertiser, unless otherwise noted below.

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 cant spread it out into too many different options. But you can prioritize the best ways to invest that thousand bucks. Here are some of the best ways to invest your first $1,000.

Overview: How and Where to invest $1000

Investment TypeBest For
Paying off debtThose with high-interest debt
High-yield savings accountEmergency fund
Tax-advantaged accountBeginner investing
StocksHaving control over where your money goes
Real estateAlternative investment
ArtAlternative, long-term investment
Peer-to-peer lendingHigh-risk/high-reward
CDThose who don’t need the money right away
Treasury securitySafe investment to balance risk
Use a Micro-Savings app to both save and investThose who want to invest while shopping

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.

Chime SpotMe® Disclosure - Eligibility requirements and overdraft limits apply. 

Chime Disclosure - Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC.

1Chime cannot guarantee when files are sent by the IRS and funds can be made available.

^Early access to direct deposit funds depends on payer 

Chime APY Disclosure - 1The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of November 1, 2021. No minimum balance required. Must have $0.01 in savings to earn interest. 2The average national savings account interest rate of 0.06% is determined by FDIC as of November 1, 2021 based on a simple average of rates paid (uses annual percentage yield) by all insured depository institutions and branches for which data are available. Visit https://www.fdic.gov/regulations/resources/rates/ to learn more.

3. Put It Into a Tax-Advantaged Account

If you don’t have an employer-sponsored retirement plan, or if you arent 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.

Related: Blooom Review - Finally, a Robo-Advisor for Your 401(k)

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 E*TRADE, TD Ameritrade, or Ally Invest. 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. 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).

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Invest in individual stocks with as little as $5!

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.

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 with a minimum of $5,000, 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. Own a Piece of Art

If you’re looking for a long-term, potentially lucrative investment to diversify your portfolio, you might want to consider blue-chip art works by famous artists like Andy Warhol. Traditionally the preserve of multi-millionaires, innovative platform, Masterworks has made it possible to own a share in one of these pieces, utilizing blockchain to maintain accurate ownership records.

It’s an illiquid asset - pieces can only be sold when all owners vote to do so, typically selling after 5-10 years. But if your eye is on the long game, it could be a smart choice for an alternative asset. Over the past 18 years, the blue-chip art index outperformed the S&P 500 by 250%. Find out more in our Masterworks review.

SEE IMPORTANT INFORMATION HERE.

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8. 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 LendingClub, 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.

9. 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 a good return on your investment without risking your capital like you will with many investing opportunities.

Read more: Best CD Rates

10. 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.

11. 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.

Visit Stash or Read our full review on Stash Invest.

12. Invest in Cryptocurrency

It’s a common myth that you need a lot of money to invest in cryptocurrencies. Even if you only have $1k at your disposal, it’s more than enough to diversify in this manner.

A service, such as Coinbase, allows you to invest in cryptocurrency via a simple to use online dashboard or app. Either way, you gain access to all the most popular cryptocurrencies, ranging from Bitcoin to Ethereum to Litecoin.

It only takes a small investment to get your feet wet. In fact, since this is a riskier investment, you want to start small. Make it 5 to 10 percent of your investment portfolio to start, track your progress, and then decide what to do next.

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.

FAQ

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.

Read more: Wealthfront Review: Low Cost Robo Investing and Financial Planning

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.

Bottom Line

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.

Related: Here’s How to Easily Save $1,200 in a Year

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.

Disclaimer- Paid non-client endorsement. See Apple App Store and Google Play reviews. View important disclosures.

Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.


¹For securities priced over $1,000, purchase of fractional shares start at $0.05.


²Debit Account Services provided by Green Dot Bank, Member FDIC and Stash Visa Debit Card issued by Green Dot Bank, Member FDIC. pursuant to a license from VISA U.S.A. Inc. Investment products and services provided by Stash Investments LLC, not Green Dot Bank, and are Not FDIC Insured, Not Bank Guaranteed, and May Lose Value.” because the article mentions the debit card.


³You’ll also bear the standard fees and expenses reflected in the pricing of the ETFs in your account, plus fees for various ancillary services charged by Stash and the custodian.


⁴Other fees apply to the debit account. Please see Deposit Account Agreement for details.


⁵Stock-Back® is not sponsored or endorsed by Green Dot Bank, Green Dot Corporation, Visa U.S.A, or any of their respective affiliates, and none of the foregoing has any responsibility to fulfill any stock rewards earned through this program.

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