That last thing you want to do after saving up that first $1000 to invest is to lose it! Whether its $100, a $1000 or a million, you worked for it and now you want to see it work for YOU!
And oh that money can work.
Invest just $1,000 and it can grow more than ten-times over 35 years on a 7% annual return. Commit to investing $1,000 a year and you’ll have nearly $150,000 on which to retire. That’s about how much the average American has saved by retirement and you’ll only need to invest $83 a month.
My five favorite ways to invest a grand are not only great low-cost investing options but offer returns to beat your investing goals and safety from a stock selloff!
That’s more important than you might realize. Protecting your money can be just as important as growing it. The best investments for your $1,000 are ones you might not have heard about but will help diversify your risk from stocks.
Instead of earning that 7% return shown above, some of these investments yield 12% and more with the potential to double your money in less than five years.
But before we get to some of my favorite investments when investing small amounts, let’s make sure we start off right with some of the investing basics that will help you make money!
How Much Do You Need to Start Investing?
We’ll get to those five great investments for $1,000 in the next section but I want to talk about three key points on how to invest this hard-earned money first. After more than a decade as an equity analyst and financial advisor, I’ve learned that how you invest is just as important as the investments you choose.
You can start investing with as little as $100 on most investing sites but it helps to start with a little more to avoid some of the risks in individual stocks and investments. Investing $1,000 can mean a big difference in being able to get the diversification you need and really start seeing your money grow.
But how should you invest $1,000 and how fast can your earnings pile up in my favorite investment strategies?
Before we get into my favorite ways to invest $1,000, let’s cover HOW to invest and why it’s just as important as the investments you buy.
- Diversification means buying enough individual stocks or investments so that a big loss in one will not seriously dent your portfolio. Invest $500 in one stock and it accounts for half of your $1,000 portfolio meaning a big loss could really hurt. Invest $100 in something and it accounts for a much smaller chunk of your total wealth.
- Investing fees are one of your biggest enemies and will eat away at any return you earn. Buying ten stocks every three months adds up to $400 in annual fees even at the less expensive investing sites. You’ve already lost 40% of your $1,000 investment and you have only just begun! Make deposits into your investing account regularly but wait to invest to save on fees.
- Investing has to be for the long-term, whether you’re investing $100 or $100,000! I’ve worked as an investment analyst for more than a decade and can tell you that even the pros don’t know where stocks are going from month to month. Investing should be like a savings account…one with a really amazing return.
With these three points in mind, it should be clear why you should wait to invest $1,000 rather than jumping into the stock market with $100 or less. Investing $1,000 means you’ll have enough to buy a wider range of investments and can do it all at once rather than several times, racking up those fees.
But the question of what you should invest your $1,000 remains, so…
Here are my favorite ways to invest $1,000!
Investing $1,000 in Peer Lending
Investing in peer loans isn’t yet as common as stock investing but it may soon be. Peer loans offer a lot of the benefits of fixed-income bond investing but pay higher returns and avoid some of the disadvantages of bonds.
I invested $10,250 earlier this year on a special promotion for Lending Club to get $300 bonus cash. That money has grown to nearly $11,500 for an annualized return of 9.65% and it hasn’t even been a year yet.
I’ve been investing in peer loans on Lending Club for a few years and have averaged an annual return of almost 10% – that’s way above the return on other bond investments and at less risk that stocks.
Most investors are way underinvested in bonds and bond-like investments like peer loans. These investments are going to save your portfolio when stocks plunge. You’ll keep getting your monthly earnings on the p2p loans even as the market tumbles.
Five-year bonds of large corporations pay just 2% annually, that’s just barely above inflation but still might be better than investing in stocks if the market hits a rough patch. Even the safest category of peer loans is paying upwards of 6% annually, and these are people with credit scores approaching 800 FICO.
- Since peer loans are for terms of three- to five-years, prices don’t fall as much as long-term bonds when interest rates rise
- Investing in peer loans through a retirement account means all the interest you receive is tax free for decades
- Peer loan investments won’t fall with the stock market, making them a good way to lower your risk in a traditional stocks and bonds portfolio
Before you click out and start investing in p2p loans, check out this article on 3 Lending Club Strategies for Safety and Return. You'll find a strategy that will fit your return needs and risk tolerance.
Here's the deal with investing in peer loans:
You can invest a minimum of $25 in each loan so it’s really not practical to start by investing $100 but investing $1,000 means you can buy up to 40 loans for your portfolio. Each loan will be about 2.5% of the total and won’t cause a steep drop in your investment if it defaults.
I interviewed one peer lending investor that has earned an average of 12% annually since 2009, making a $10,000 profit on his initial investment. He shared his strategy for picking peer loans including which risk categories he chooses and which borrowers he selects.
Open an Account on Lending Club Investing
and start investing in peer loans
The New Way to Invest $1,000 in Real Estate
I’ve been investing in real estate for nearly two decades, first in residential rentals and then in commercial space. My first job in college was as a commercial real estate agent and investment analyst.
I love the feeling of taking a property, putting some sweat equity into it and earning a monthly cash flow from the rent. No other investment has made as much generational wealth as real estate.
But traditional real estate investing is a pain…sometimes more than it’s worth.
I’ve dealt with just about every tenant complaint you can imagine, from fixing electrical wiring to that 2am call to light a water heater (yep, they couldn’t just strike a match and do it themselves).
Recently, I found an easier way to invest in real estate. This new online way to invest gives you the monthly cash flows and safety of real estate without all the headaches. It’s called real estate crowdfunding and I’m convinced it is going to become more popular than house flipping or real estate investment trusts (REITs) for regular investors.
With real estate crowdfunding, you invest as little as $1,000 in individual projects managed by professional developers. These projects can be for commercial or residential property and the investment can be in debt or equity…that means you can get a diversified portfolio of investments with just a few thousand dollars, something that was never possible in traditional real estate investment.
Streitwise is a unique real estate crowdfunding platform I've been following that is a new twist on REIT investing. Many of the crowdfunding sites are still only open to wealthy investors but the Streitwise real estate fund is open to everyone.
The Streitwise 1st Streit Office REIT invests in high-quality office properties and as of the date of this video, has paid a 10% annualized dividend. The fund is managed by seasoned real estate professionals that have acquired or managed over $5.4 billion in property and across all property types.
Check out the Streitwise real estate fund here
Staff at Streitwise reviews the investment documents and does due diligence on property developers. Only about 5% of the deals submitted get approved to go on the site so it’s good to know that there is a level of vetting in the investments.
Streitwise manages all the payments from the professional developers to the investors so all you have to do is sit back and wait for the checks.
- As with direct real estate investment, make sure you are investing in multiple properties for diversification. That means different property types and different locations.
- Invest in a mix of debt and equity deals to further diversify your risk and manage cash flow.
- Don’t feel like you have to invest all your money at once. The platform posts new deals regularly so it’s best to stagger your investments.
I get most of my investments on Streitwise but also invest on other crowdfunding sites. Since the industry is new, most platforms don’t have more than five or ten new deals a month. It costs nothing to open an account on different sites and you get access to more deals.
The Best Stocks to Invest $1,000
For those that still want a more traditional approach to investing your first thousand, stocks can still make your money work for you. Protecting your money while it grows just means you’ll need to understand how different sectors and assets can fit in your portfolio to reduce risk from a crash.
I have a couple of investing accounts but use Ally Invest for my taxable investing account. I first heard about the platform, then called TradeKing, at a financial bloggers’ conference in 2015 and immediately signed up for an account.
Besides offering all the stock research and investment calculators you’ll need to do your own investing, Ally Invest offers the lowest commissions in the industry. Each trade costs just $4.95 and you can get it down to $3.95 per trade on accounts of $100k or more.
One of my favorite ways to invest in my stock account isn’t in stocks at all but in master limited partnerships (MLPs). These are companies that own oil & gas pipelines and storage facilities. These companies benefit from a special tax break. They don’t pay taxes on profits as long as they return the majority of the money they make each year to investors.
That means safe dividend yields as high as 8% plus appreciation on shares. That’s $80 in cash on your $1,000 investment every year.
Better yet, some of the dividend you receive is counted as a ‘return of investment’ so it’s not taxed as income like other dividends. Learn more about MLP investing in this post about dividend income ideas.
Open an account on Ally Invest for up to $1,000 in commission free trades
Invest in a Home Business for Less than $1000
So far, we’ve talked about traditional investments as a way to put your $1,000 to work but non-traditional ways to invest can be some of your highest returns.
Few investments have as high a return as investing in a new business. I started two blogs in 2014 with less than $250 for web hosting, domain registration and a few paid plugins.
Those two sites have grown to five and a monthly income that averaged over $6,000 last year. Of course, I’ve reinvested money over those three years but it’s still an amazing return on that small initial investment.
There are a lot of businesses you can start with far less than $1,000 or even $100 like blogging, self-publishing and even Amazon FBA.
Let’s stick with the blogging example because I truly believe owning websites is the 21st century equivalent to real estate investment. Billionaires are already being created on owning a piece of digital real estate and that trend is only going to increase.
So what does $1,000 get you when starting your home business?
A lot more than you actually need as it turns out:
- One-year of web hosting on Blue Host $47.50 (required)
- Domain registration $0.99 through special Blue Host offer below (required)
- Three-months of Aweber email list management $50
- Landing page tool from OptimizePress $99
- Pretty Links linking tool $57
Really the only expenses you need are the web hosting and domain registration which come to less than $50 for the entire first year. Even some of the paid services and plugins I use only bring the startup costs to just over $250 and will really give your blog some momentum.
Use this special offer from Blue Host for web hosting and get a free domain
How to Invest $1000 in Yourself
Another investment many people overlook is taking courses and investing in yourself. I researched investment returns for stocks, bonds, real estate and education and found that investing in classes actually provides the highest annual return.
Not only does investing in yourself through education mean higher wages but it also means more job flexibility, security and more options. A lot of these aren’t easily put into a number return so the return to investing in yourself is probably much higher than we know.
Investing $1,000 in courses goes a lot farther than you can imagine. Online course website Udemy regularly runs promotions to get any of their video courses for just $15 each. That would mean more than 60 courses in anything from running a business to self-improvement, software design, marketing…the list goes on forever.
Think about it, you could take five courses (upwards of 10 to 20 hours of video instruction) with the potential to totally change your life for less than a $100 investment.
That’s a great investment!
Browse available courses on Udemy Now
Best Ways to Invest Money Short-Term
Whenever you invest your money, it’s best to take a long-term view. Anytime you try to make lots of money in the short-term by picking stocks or hot investments, you run the very real risk of losing money rather than making it.
That said, a few of the options above can be great short-term investments if you need to make money fast.
Most real estate crowdfunding projects are for between two and five years though some of the debt investments are for a year or less. These one-year investments tend to offer returns between 12% to 16% so an investment of $1,000 would yield about $150 in profit. Not spectacular but not bad considering it’s a relatively safe investment.
Of course, you can pick stocks with an Ally Invest account and hold them for as little time as you wish but I’ve yet to see a trading strategy that actually makes money. Most traders I know, and I know quite a few from my Wall Street days, make less than 15% annualized on their money.
The best short-term investment may be putting the money in your home business. I know, this is really a long-term investment as well but I made $3,300 my first year of blogging. That was on a small investment and I’ve made over $120,000 in the three years since then.
How to Invest $1000 and Double It Fast
If you’re looking at doubling your $1,000 investment, you might have to wait a while. At a 7% rate of return, the average for a stock and bond portfolio, it takes ten years to double your money.
Using long-term average returns on the investments above; it would take about seven years to double your money in stocks or peer-to-peer lending, six years in real estate crowdfunding, 16 years to double your money in bonds or less than a year if you invest in your own website.
How to Start Investing with Little Money
It doesn’t matter how much money you start with investing. The most important point is just to get started whether it’s with $100 or with $1,000 investment.
There are some important things you can do when investing with smaller amounts to help your returns go farther.
- Pay off high-interest debt over 12% first so you’ll have more money to invest in the future
- Be your own advisor and do your own investing. Spend a little time learning about investing so you can save the 2% fees on an advisor and the annual fees charged on mutual funds. Invest directly in stocks or other investments and manage your own investments.
Spread your investment in at least three asset classes (stocks, bonds, real estate, p2p) for the diversification that will protect your money.
Investing Starts with Your First $1000 a Year
The real power of investing isn’t to just invest $1000 and then doing nothing. Make investing part of your monthly budget. Investing just $50 a month will be worth more than seven-times the amount of a single $1000 investment over 30 years.
Don’t worry about investing every penny you earn, just put in what you can afford and follow the stock market basics to diversify your risk and lower your investing fees.
These are just five of my favorite ways to invest $1000 but you should really hold a range of asset classes including stocks, bonds, real estate and peer loans in your portfolio. Whether you’re investing $100 or $100,000 – don’t worry about beating the market. Invest for the long-term and never take money out of your investments.
