The best investment is $1,000
At its core, investing is a cumulative game, you build a portfolio little by little rather than all at once. In this article, you will find out how you can invest $1000 and get the most bang for your buck.
Dealing with debt and building emergency funds
Paying off debt is always the best return guaranteed, the interest you save by paying off debt faster is basically risk free. So the answer to the question “How can I invest $1,000” is always “Pay off your debts first”. Even if you are debt-free, there is always an urgent need to put $1,000 into an emergency fund to reduce the likelihood of you falling into debt in the future.
There are many scenarios where you end up investing at the same time as you take on your debts, but it has to be for a rational reason such as investing for a retirement account, or to defray the cost of children’s education.
Simplicity and versatility at an affordable price
If you are an investor looking to invest $1000, then you should look for the best investment that is simple, low risk and low cost when it comes to fees. If you want a decent return, you must reduce the risk by diversifying the investment.
Investing $1,000 in Exchange Traded Funds and Index Funds
Exchange-traded funds and index funds are an excellent way to invest small amounts of money. These funds also have the advantage of transparency, so you can find out everything you need to know about a particular ETF or index in a few minutes.
With $1,000, you could, for example, divide the money into $250 in a risk-based growth ETF, $250 in an ETF and put the remaining $500 in a bond ETF. Or you can reverse or customize the mix as much as you like, it all depends on your time horizon and risk tolerance level.
Invest $1,000 in a target date fund
Target date funds offer similar versatility to ETFs, but require less effort. A target fund may have a higher expense ratio than your primary ETF, but in return you won’t have to worry as much about allocating your money or rebalancing the portfolio over time.
Invest $1,000 with Roboadvisor
The fees that come with active management when your investment capital is limited to $1,000 can be hard to beat, but that’s not the case with robo-advisors like Betterment, Acorns and Asset Builder who offer their services at a much lower price than traditional portfolio managers. In addition to these offers, you get the benefits of active management and frequent portfolio balance during market events without having to pay the traditional rate.
Invest $1,000 in low-risk debt instruments
The funds mentioned above generally carry higher risks and returns than investments in debt instruments, but if your main goal is to preserve your $1,000 rather than increase it, then debt investments may be a better option for you.
Treasury notes, certificates of deposit, and savings bonds are not the most exciting way to invest your $1,000, however, they have very low risk and a modest return. There are direct corporate bond offerings that offer much higher interest rates, as well as bond exchange-traded funds, but both require more research and usually carry very high levels of risk.
Investing $1,000 in one stock
This option requires a higher tolerance for risk and more research, but offers high potential returns for as low as $1,000.
$1,000 is enough to make a single share purchase through an online broker, you may lose some in the transaction itself, but if you find the right share, it can return the transaction costs many times over. There have been several opportunities in the past five years where investing in Meta, Apple, Netflix or Google would double or triple $1,000, but investing $1,000 in a single stock is generally very risky.
Invest $1,000 in options and forex trading
$1,000 can be used to open an online options or forex trading account, which will offer you ways to multiply your money and make big returns in a short time. But what you should know is that of all the investments we have looked at in this article, forex or options trading ranks first in terms of the level of risk involved.
There are many people who can invest $1000 and achieve strong returns while controlling their risks by utilizing their experience in different trading strategies, but there are many others who lose $1000 or more for any reason.
If you are determined to trade options and forex, you can get a trial run through one of the simulators before putting your hard-earned money at risk.
Summary
Although it’s not a lot of money, $1,000 is well worth the investment. With so many options we’ve looked at, especially ETFs, even small sums like $50 or $20 are worth the investment, so don’t delay any longer.
It bears repeating that investing is a cumulative game, you may not go from $1,000 to super rich with a single investment, but investing $1,000 can help you gain financial security and independence.
Disclaimer: The content of this article is for informational purposes only. The information provided should absolutely not be considered as investment advice or a recommendation. No warranty is made, express or implied, as to the accuracy of the information or data contained herein. Users of this article agree that Money Secrets does not accept responsibility for any of their investment decisions. Not every investment or trading strategy is suitable for anyone. See the risk warning statement.