For most people, figuring out how to invest $1,000 will be one of the first steps to making better financial choices.
It’s a decent amount of money to accumulate, but at the same time, it’s also not a huge sum for investing.
But that does not mean you can’t find investing options for you.
If anything, you should feel good that you saved $1,000 and that you are looking to invest, instead of spending. Kudos!
So if you are starting to ask questions to yourself like, “What to do with $1,000?” or wondering things like, “I have $1,000 to invest, but I don’t know what to do next,” then this post will be for you.
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How to Invest $1,000
While investing $1,000 is not going to make you wealthy overnight, it’s a great start to building a nest egg and helping you reach financial goals.
Additionally, the financial world has changed and more companies have started to create investing options for people with all sorts of income levels.
Now, everyone has a chance to learn and put their money to work.
There is no exact way you should invest $1,000 as it really depends on your personal finances and goals.
But, you should know what options you have so you can make more informed decisions with your cash.
Below are some of the best ways to invest $1,000.
1. Invest in a High-Yield Savings Account
While not a traditional investment you might be thinking about, a high-yield savings account can be the perfect investment choice, especially if you are saving money monthly.
And if you want to play it a bit safer for now with your $1,000 then a savings account with interest might be a your preferred choice.
There are plenty of online bank accounts that accrue great interest, but have other options for your money as well.
Other investment vehicles will have a much higher rate of return as most banks offer 1-3% interest. But with these banks, they are FDIC insured so you can’t lose it all and your money can be withdrawn at any time.
2. Invest for Retirement
Investing in your company 401k is always a great choice. And it’s even better if your company offers a company match.
It’s an easy way to get your cash stacking.
Most employers with a 401k will match half or all of your contributions, typically up to 3% to 6% of your salary.
And if you don’t have a company 401k, you can open an IRA. There are two types you could choose from: Traditional IRA or Roth IRA.
Now, with those options are some rules and things to know, but they are very easy to open with any financial institution.
I prefer a Roth IRA because it offers tax-free growth and tax-free withdrawals in retirement. When I first opened mine a few years ago, I only had $500 to start with.
And since then, I’ve maxed it out the last three years.
3. Consider Purchasing ETFs
When it comes to your 401k or IRA, you also have a massive amount of choices of funds to invest in.
The challenge is many mutual funds or index funds have minimum investment costs. Some might be at $1,000 but many will be over that. I’m talking $3,000+.
But there are other options.
Sure, you can buy some individual company stocks, but this is not ideal and puts you at a lot of risk.
Personally, I only recommend that option when you have more money invested and can risk a small amount to play around with.
However, this is where exchange traded funds or “ETFs” can be great options. ETFs trade on an exchange like stocks. And there are all types of investments like various stock sectors, commodities, or bonds.
What makes ETFs great is they offer low expense ratios and fewer broker commissions than buying the stocks individually.
So when you are ready to invest $1,000 in the market, you have more options to diversify. You can learn more about ETFs here.
4. Invest $1,000 in Real Estate
Many people would love to invest in real estate, but get scared off by the thought. For one it can be very expensive, quite a bit of work, and you really have to understand how real estate works.
Yet, real estate is a great option to build wealth and diversify your money.
And I’m not saying you shouldn’t learn or try, but $1,000 typically won’t get you too far. However, that has changed thanks to real estate crowdfunding sites.
These platforms allow you to invest in commercial properties, single-family homes, and apartment properties with as little as $500.
For example, two of my favorite platforms are Fundrise and DiversyFund, both which are only $500 minimum investments.
But if you are still a bit unsure, you can also try Groundfloor, where you only need a $10 minimum to get started in single-family home investing.
Another option you have is with a REIT, which there are ETFs and Index Fund versions in most investing institutions like Vanguard. However, those typically follow the fluctuations of the stock market.
5. Use Rob-Advisors To Your Advantage
Just like digital companies have appeared for real estate, the age of robo-investing is also here. Essentially, instead of worrying how to invest or trying to learn the best options, you let an algorithm handle that for you.
Robo-advisors use advanced artificial intelligence based on a series of questions you answer and help you invest based on those answers.
This means you can get many of the benefits of a financial planner for a much lower cost and less headaches managing your investments.
There are a few on the market that offer different features, but here are two options you might want to consider:
6. Invest in Your Own Business
If you have ever wanted to start your own online business or side hustle, investing $1,000 in your project might be a great choice.
Many side hustles and online businesses do not require a lot of start-up costs, so this money can go to great use in getting you started.
For example, I started Invested Wallet with less than $1,000 and I’ve made that money back, plus more this year.
Before you jump in, make sure you do some research and brainstorming about your business.
What are you passionate about? Is there a market for what your business might do or sell? Even think about what you enjoy doing, many hobbies can make you money.
7. Invest in Your Kids
This only applies if you currently have any children or maybe are planning on having some soon. But a good way to invest $1,000 it start planning for your kids’ education.
This is to say that you have plenty of time to start investing. If your child or children are close to high level education now, you may need to ramp up your saving and investing.
But if you are just getting started with your family, taking that $1,000 and opening a 529 plan can be a great idea. The money invested in a 529 is after taxes and your investment grows interest free.
And when the money comes out of the account and is used for education expenses, there are no taxes to worry about.
Now, it doesn’t mean your kids will go to college in the future or need to, as there are plenty of options for them in adulthood.
But it’s good to be prepared and have a family financial buffer for when the time comes.
Best Ways to Invest $1,000 Per Month
Hopefully, the above options give some ideas of how to invest $1,000. But, let’s say you got a rhythm going and you will have $1,000 per month to invest.
First, great work getting to that or working on your finances to have that option.
For those of you who are not there or think it’s impossible, just stay patient and keep working at it. It took me a good three years before this was a reality.
How did I do it? Working on my career worth, increasing my salary, cutback unnecessary spending, paying myself first, teaching myself personal finances, and staying patient.
So, if you have a $1,000 each month to invest, where are the best places to start? Any of the options above or combo of options could be great.
However, here are my recommendations to consider:
- Your company 401k, especially with a company match
- Your own IRA or Roth IRA
- Build your savings account
- Invest in Real Estate
When I had $1,000 per month, I started out with maxing out my Roth IRA and the remainder going towards my high-yield savings.
Now that I’ve grown my savings rate and can invest each month, I put it towards my own side business and starting to explore real estate further.
Again, what you decide to invest in is up to you! Analyze your current finances, goals, and money to see what order makes sense for you.
And remember, the above is assuming your debt is paid off or close to it and you are looking for ways to put this money to work.
Here is some common questions related to investing $1,000 that come up. If you are looking for more detail, revert back to the above content.
What is the best way to invest $1000?
There is one true best way to invest $1,000 because it varies on your personal goals and current financial situation. What might work best for you right now might not be the same for someone else. That being said, these are the best options to consider:
- High-Yield Savings Account
- Investing for Retirement
- Investing in ETFs
- Real Estate
- Your Kids
- Your Own Business
What should I do with $1000?
Although investing $1,000 is a great option, you might not also be ready for that yet. And that is certainly okay. Besides investing, here are a few others options for your $1,000:
- Pay off some extra debt
- Add to your emergency fund
- Start a side business
- Use it towards house maintenance
- Use it towards car maintenance
How can I start investing with little money?
Investing with little money won’t make you rich overnight, but it starts to build the right foundation for your future. We all have to start somewhere and investing with little money is possible. Here are a few options to consider:
- Use a robo-advisor to invest your change
- Join your company’s 401k plan
- Get started with low cost ETFs
- Use a high-yield savings account
- CDs or Savings Bonds