How to Invest $1,000: 7 Smart Ways

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How to Invest $1,000

Progressing toward financial freedom requires solid money management and investment decisions, regardless of what stage you’re at currently. If you have $1,000 to spare and you’re not sure how to invest it, you’ve got some great options available to you.

In this article, we’ll look at how to invest $1,000 with the goal of producing solid returns for the future. Of course, investing involves risk, so be sure to do your own due diligence before making any decisions.

How to Invest $1,000

1. ETFs

Exchange-traded funds (ETFs) may be considered a good starting point for many investors. With an ETF, you’ll be getting a portfolio in a single fund, which provides a level of diversification even with a small investment. For example, you could invest in an ETF that tracks the S&P 500, so your investment’s value will go up and down along with the S&P 500.

ETFs are popular for long-term investors for a few reasons:

  • Many ETFs are available with very low expense ratios (fees), so it’s a low-cost way to invest.
  • You can easily buy and sell ETFs thanks to platforms like Public.com and Webull.
  • You can start with as little as a few dollars by purchasing fractional shares.
  • It’s an easy way to get some diversification.
  • There are many ETFs available with strong track records (see our list of the best ETFs for long-term growth).
  • It’s a low-maintenance investment.

If you have a long-term buy-and-hold investment strategy, you’ll probably like ETFs. The simplicity of ETF investing appeals to many people.

If you’ve got a long-term approach, you can buy an ETF that tracks a stock market index and not pay much attention to it. The value will fluctuate in the short term, but the longer you’re planning to hold it, the better your chances are of coming out ahead in the end.

As you have more money to invest, you can continue purchasing the same ETF, or you can invest in a few different funds.

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2. Build a Diversified Portfolio with Fractional Shares of Stocks

If you want to take a hands-on approach to investing, you may prefer to choose the stocks in your portfolio rather than buying an ETF. With share prices in the hundreds or thousands of dollars for some companies, you might assume that you won’t be able to hold many different stocks if you’re starting with $1,000. But thankfully, brokers like Public.com and Webull allow you to buy fractional shares, so you can build a custom investment portfolio with plenty of diversification, even with a small amount of money.

For example, if you wanted to own a piece of Amazon (AMZN), which currently trades at over $2,000 per share, you could do so by buying 1/20th of a share for around $100.

This approach gives you the ability to build a well-diversified portfolio without a lot of money. You can own shares in companies like Amazon, Facebook, Apple, Google, and others without having to come up with thousands of dollars.

You can also continue building your portfolio with small amounts going forward. For example, if you have $10 to invest, you can buy a fractional share rather than waiting until you have a few hundred dollars to purchase a full share.

If you’re just getting started and not sure what stocks to buy, Public.com offers investing Themes that you’ll find very helpful. Themes are essentially lists of stocks and funds that fall into specific categories.

There are more than 40 Themes available for things like green power, space exploration, cannabis, tech giants, e-commerce, and much more. This is an ideal way to find investments that interest you.

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3. Buy Dividend Stocks

If you’re looking for a more passive way to invest, you might want to consider buying dividend stocks. Dividend stocks are shares of companies that pay regular cash dividends to shareholders. The payments are usually made quarterly, but some companies pay monthly or annually.

There are many reasons to like dividend stocks:

  • They can provide a steady stream of income.
  • Dividends can be reinvested, so your investment will compound over time.
  • Dividend stocks tend to be less volatile than the stock market in general.
  • Many companies have increased their dividends for years.

When you buy a stock that pays dividends, you’ll benefit from appreciation in the stock’s value (as long as the value goes up over time) and from the dividends that can be taken as cash or reinvested.

Dividend stocks are popular with many buy-and-hold long-term investors. If this is the approach you decide to take, you’ll start by choosing the specific stocks you want to buy (conveniently, Public.com has a Theme that provides a list of dividend stocks). Then, as you have more money to invest in the future, you’ll continue by purchasing more shares of those stocks.

If you’re using a brokerage like Public.com or Webull that supports fractional shares, you can invest whenever you have a few dollars.

4. Get a Portfolio Created by Experts

M1 Finance is an intriguing platform for long-term investors. It automates your investing but you have full control over the investments in your portfolio. M1 Finance uses “pies”, which are pre-made portfolios with percentages allocated to specific investments. Whenever you add money to your account, M1 Finance will automatically invest it for you based on your pie.

There are more than 80 different pies available that have been created by experts for different purposes or investment goals. Alternatively, you can use a pie created by another user, or create your own custom pie.

A basic M1 Finance account is free. There are no maintenance fees and no fees or commissions for trades. M1 Finance does have some optional upgrades that come with an annual fee (M1 Plus) but the free account provides everything you need to manage your portfolio using pies.

If you want access to a traditional IRA or Roth IRA, you’ll need an M1 Plus account, which costs $125 per year.

If you’re not ready to pick out your own investments, going with an expert-created pie from M1 Finance is a solid option. You only need $100 to start, and you can continue to add to your portfolio whenever you’re able.

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5. Real Estate

Investing in real estate is another way to generate income and build wealth over time. There are many ways to get involved in real estate investing, from buying rental properties to investing in REITs (real estate investment trusts) to crowdfunding.

REITs are companies that own or finance income-producing real estate. They tend to be less risky than other types of real estate investments because of diversification, and they offer the potential for high yields.

There are also many REIT and real estate ETFs that provide a very easy way to invest in real estate. You can simply buy the ETFs of your choice through a brokerage like Public.com or Webull, just like you would buy an individual stock.

Crowdfunding is a newer way to invest in real estate, and it’s become popular because it’s easy to get started. With real estate crowdfunding, you can invest in a variety of different projects, such as office buildings, apartments, and hotels.

Some crowdfunding platforms have higher minimums, but there are a few options if you have $1,000 to invest. Fundrise is the most popular real estate crowdfunding platform and they have a minimum investment of just $10 (you can select a Traditional IRA, Roth IRA, or taxable investment account). Fundrise returns have been excellent historically, so it’s a solid choice. DiversyFund is another platform with a relatively low minimum investment of $500.

Arrived is a newer platform that focuses on single-family rental properties. For as little as $100, you can own a share of an income-generating investment property, without the responsibilities of being a landlord. This is an excellent way to make passive income.

6. Use a Robo Advisor

Robo advisors have become increasingly popular in recent years, and for good reason. They offer a simple way to invest without having to be a savvy, experienced investor.

With a robo advisor, you’ll go through a series of questions when you set up the account. Your answers will help it to understand your personal situation, financial goals, and level of risk tolerance. Then, the robo advisor will automatically invest your money for you with the appropriate asset allocation.

As you add new money, it will be invested automatically as well. And the robo advisor will periodically evaluate your portfolio and reallocate it as needed. It’s a very passive way to invest and it’s generally best for people who prefer not to be involved in the specific investment decisions for their portfolio.

Robo advisors are generally very low cost. For example, Betterment has an annual fee of 0.25% (just $2.50 per $1,000 invested). That’s very low compared to a traditional human financial advisor who would typically charge 1% or more.

7. Invest in Yourself

Investing in yourself is one of the best ways to use your money. It’s an investment that will pay off throughout your life in the form of higher earnings potential and greater job satisfaction.

Buy an Online Course

One way to invest in yourself is to buy an online course. There are courses available that will teach you just about anything you want to learn. For example, you may take an investment course or a course that teaches you how to make money online. These courses could help you financially in the long run by making more money or getting better returns on your investments.

Many courses can help you to learn new skills or advance in your career. And they’re often more convenient and less expensive than traditional college courses.

Start a Business

If you have a great business idea, then starting your own business may be the best way to invest in yourself. Of course, there’s no guarantee that your business will be successful. But if it is, then it could potentially make you a lot of money.

There are many different online business models you can choose from, but my top recommendation is to create a niche website. You can build a site on a topic that interests you, and the business model is friendly for beginners and experienced marketers. It’s possible to start your site for less than $100, but if you’re willing to invest $1,000, you can hire a freelance writer to create content that will speed up your progress.

To learn more, please read my Guide to Building a Profitable Niche Website.

Frequently Asked Questions

What type of account should I open?

If you’re saving for retirement, a retirement account like a 401(k) or IRA is ideal because of the tax benefits. For example, your investment gains in a Roth IRA will not be taxed when you withdraw the money, so that’s usually a good starting point.

How can I become a real estate investor for $1,000?

Fundrise allows anyone to invest in real estate for as little as $10. You’ll own a share of an income-generating real estate portfolio.

Where should I keep my emergency fund?

Most personal finance experts recommend keeping an emergency fund in a savings account to avoid the possibility of losing money. However, if you’re willing to take more risk, you could use a brokerage account as an emergency fund and invest in stocks or ETFs. Since you can sell the assets at any time, you could have the cash within a few days in the case of an emergency. However, there’s also a chance the value could decrease.

How to Invest $1,000: Final Thoughts

Investing your money is a smart way to grow it over time. And with $1,000, you have plenty of investment options. You can start investing in the stock market, ETFs, real estate, or even yourself. All of these investments offer more upside than a savings account.

If you’re wondering how to invest $1,000, the key is to find an investment that you’re comfortable with and that fits your goals. With a little research and effort, you should be able to find the best investment for your money.

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