Making the most of your money by investing wisely is a goal shared by many. But how do you make sure your $1,000 investment not only grows, but also provides the financial security and returns you want?
How to invest $1,000
That’s why I wanted to share some of my favorite ways to invest $1,000. Whatever you decide, you should be proud of yourself for taking the time to think about money.
$1,000 may not seem like much to start investing, but I promise you, once you see the power of compound interest, you’ll be shocked at how this simple action will rewrite your financial future.
#1: Build a Diversified Portfolio With Fractional Share Investing
Risk level:
Moderate
While you can always invest in individual stocks, fractional stock investing allows you to buy a small portion, or “fraction,” of the stocks you want.
This investing strategy allows you to maximize your diversification and invest in big-name stocks that you wouldn’t otherwise be able to afford. For example, Amazon ( AMZN ) stock is trading at over $3,000 as of this writing.
If your $1,000 investment doesn’t get you one share of stock, fractional stock investing allows you to invest $1,000 in one share of Amazon stock.
This way of buying stocks is perfect if you only have $100 to start investing, but it’s also suitable for investors with $1,000 or $5,000 to invest.
How it works:
Investing in fractional shares is just as easy as investing in traditional stocks or ETFs. All you have to do is find a brokerage firm that allows fractional stock investing. From there, you can research options and invest in fractional stock markets at your own pace.
Where to start:
Many online brokers offer real-time fractional stock investing with no commissions. Fractional shares can be as small as 1/1,000,000 of a share, so you can spread your initial investment of $1,000 across hundreds of different companies.
Who is best suited for:
Fractional stock investing is a good option for anyone who wants to diversify their portfolio by investing in different
#2: Build a Micro Real Estate Portfolio
Risk level:
Moderate
There are many ways you can start investing in real estate, but the easiest way is through Fundrise. With as little as $500 (just half of your investment capital), you can make an initial investment.
You can use their starter portfolio to put your money into several different REITs and get you diversified instantly. Another solid option is Realty Mogul.
How it works:
Fundrise REIT allows you to invest any money you have (in this case, $1,000) in real estate without becoming a landlord. Just open an account, transfer some money to get started, and choose a portfolio option that suits your risk appetite and goals.
Fundrise takes care of the hard work of property management and finding new investments for you. By the way, Fundrise investors have received an average platform return of 22.99% in 2021 (3.49% so far in 2022). You can see my 4-year Fundrise returns here .
Where to start:
If you’re looking for a quick, easy way to invest in real estate without having to manage a building or reduce your investment due to fees, Fundrise is your top choice. Learn more about investing with Fundrise.
Who is best suited for:
Fundrise is an ideal investment option for consumers who want exposure to the real estate market without becoming a landlord or dealing with personal properties.
#3: Let Dividends Pay Your Monthly Bills
Risk level:
low
What if you could have your mobile carrier pay your cell phone bill each month? That would be sweet, right? Heck, yes it will!
This might happen if you invest $1,000 in a telecommunications stock like Verizon or AT&T, both of which pay high dividends.
If you own enough stocks, the dividend payments can cover your monthly bills, so it’s like you’re getting a free phone. can you hear me?
You can apply this to other monthly expenses such as electricity, internet, gas, entertainment and groceries.
#4: Open a Roth IRA
Risk level:
different
A Roth IRA is an investment account that allows you to invest after-tax dollars for retirement. From there, your money can grow tax-free, and once you reach retirement age, you can withdraw your money without paying income tax.
In 2024, the maximum IRA contribution for most people is $7,000. However, individuals age 50 and older can contribute up to $8,000.
How it works:
Income caps limit who can contribute to a Roth IRA, but note that contributions are completely eliminated for single filers earning more than $161,000 and for married couples earning more than $240,000.
Where to start:
Qualified investors can open a Roth IRA using any brokerage account that offers such an account. Some of the most popular brokerage firms that offer Roth IRAs include Betterment, Stash, M1 Finance, and TD Ameritrade.
Who is best suited for:
Investing in a Roth IRA makes sense for anyone saving for retirement or future goals. This type of account is also ideal for anyone who wants to build a tax-free income stream for retirement. Learn more about the best investments for a Roth IRA.
#5: Build Up a High-Yield Emergency Fund
Risk level:
low
If you want to earn some interest on $1,000, but not lose any, a high-yield savings account is your best bet. These deposit accounts offer higher interest rates than you would get from your local brick-and-mortar bank.
How it works:
These accounts won’t earn a lot of interest, but if they are FDIC insured, there’s no chance of losing money. You can also withdraw cash at any time if you need to.
Where to start:
Save Better Rewards Savings offers one of the highest yields on a savings account today (currently 5.26%). You can even get the highest interest rates, with no minimum deposit and no monthly maintenance fees.
Who is best suited for:
Most people need to have some emergency savings in the bank. Still, this account is a good option for someone who has $1,000 to invest but may need funds in the short term.
#6: Build a Portfolio With Low-Cost ETFs
Risk level:
different
Exchange-traded funds (ETFs) make it easier to diversify your portfolio. This type of investment is similar to a mutual fund in that you can buy many different stocks in a single ETF.
How it works:
ETFs allow you to buy a variety of stocks and other securities in one lump sum. You can invest in ETFs through most major brokerage firms, and you can often do so with low (or no) investment fees.
Where to start:
M1 Finance is one of the best options for buying ETFs. This investing platform offers over 1,300 different ETFs that you can trade for free, which is truly an amazing deal. Read my full M1 Financial review.
Who is best suited for:
Investing in ETFs makes sense for any investor. It’s even better for someone with $1,000 to invest, since ETFs give you more diversification than individual stocks.
7: Let a Robo-Advisor Invest on Your Behalf
Risk level:
different
Robo-advisors are technology platforms that use science and advanced algorithms to make investment decisions on your behalf. Due to the popularity of robo-advisors, Deloitte believes that the robo-advisor industry could reach $16 trillion in assets under management (AUM) by 2025.
How it works:
When you open an account with a robo-advisor, you typically start the process by answering a series of questions about your finances and goals. From there, the robo-advisor uses computer algorithms to find the best investment options that fit your risk tolerance and investment timeline.
Where to start:
I almost always recommend Betterment as my top choice among robo-advisors because of their user-friendly and intuitive interface, low fees, and suite of other financial products. You can open an account with Betterment with no minimum balance required. Learn more in my Betterment review.
Who is best suited for:
Robo-advisors are for investors who want help determining which investments are best for their portfolio.
#8: Pay Off Debt
Paying off debt doesn’t usually come to mind when you think about investing, but the statistics don’t lie.
Americans’ debt burden increases every year, and while your mortgage interest rate may be low and some of your student loans have been forgiven, the interest you pay on other debt is killing your ability to build wealth.
While $1,000 may not make a huge difference in reducing your debt, it is a critical step toward achieving financial freedom.
I can’t put into words how I felt when I finally paid off the student loans and credit cards I had accumulated in school.
I cannot assess my sense of freedom.
Taking $1,000 to pay off your debt can bring you one step closer to the joy of being debt-free.
#9: Invest in Yourself
I know this may sound cliche, but from what I’ve learned, investing in yourself ultimately gives you the highest ROI or return on investment.
When I first heard this word, I didn’t quite understand what it meant. As I started down the traditional investing path, surrounded by other successful, business-savvy entrepreneurs, I began to finally understand what investing in yourself really meant.
Start small, maybe by purchasing a book or a $20 course on Udemy. A bigger investment might be attending that conference you put off every year, or perhaps signing up for a business coach that your peers speak highly of.
I can attest that all of this has made an impact on my personal and financial success, and all for less than $1,000.
The biggest investments I’ve made in myself have been business coaching programs and high-priced courses.
Courses have gotten a bad rap lately, mostly because of money-hungry gurus who are keen to line their own pockets.
Set aside $1,000 or more for courses you think are worth the effort. I’ve even created some courses myself that have been praised and admired for the information and value they provide.
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