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Are you wondering how you can take $1,000 and turn it into even more money? Here are 5 solid and reliable ways to invest $1,000 today.
How to build a $1,000 investment portfolio
What should your portfolio look like? The answer is different for everyone, but it should be tied to your goals and how much or little risk you want to take.
Here’s an example of what a balanced portfolio might look like:
|GICs and bonds||15% to 40%|
|Stocks, ETFs and mutual funds||50% to 75%|
|Peer-to-peer lending, real estate and alternative investments||0 to 25%|
Before you invest $1,000
If you want to get the most out of your $1,000, consider the following before you invest it:
- Pay off high-interest debt. If you have any debt accruing 10% or more interest, you’ll likely come out ahead if you pay this down before you invest.
- Create an emergency fund. Prepare for the unexpected by keeping at least 3 months’ worth of expenses in a high-yield savings account.
- Build a vacation fund. If you take vacations often, consider keeping the $1,000 in a high-yield savings account to pay for your next adventure.
Invest with a commission-free online trading platform
If you’re interested in picking stocks, there are several free online trading platforms that let you start investing with as little as $0.
- Choose from multiple accounts. You can invest using a retirement, tax-free or employer-sponsored account.
- Comprehensive range of investments. Most platforms offer exchange-traded funds (ETFs), low-cost index funds, stocks and more.
- Free trades. You’ll keep more money in your pocket when you invest using a platform that doesn’t charge fees.
- Risk varies. If you invest in an individual stock, it will have more risk than an ETF.
- Requires research. You’ll need to research different stocks and analyze their performance to avoid losing money on risky investments.
- Trading fees. Some platforms charge fees every time you buy and sell, so look for one that won’t eat up your profits.
Invest in peer-to-peer lending
Lend your money to other individuals in need through peer-to-peer (P2P) lending.
- Lucrative returns. The average investor earns between 5% and 9% interest with P2P lending.
- Steady cash flow. You’ll receive steady monthly income as the borrower repays their loan.
- You’re helping someone in need. Most P2P investors enjoy lending money to help someone who needs it more than they do.
- Risk of default. There’s a chance you could lose your money if someone defaults on their loan.
- P2P lending is new. This industry has only been around since the Great Recession, so it’s hard to tell how it will do during the next economic downturn.
- Unsecured loans. Often, borrowers don’t put up collateral for the loans, so there’s a slim chance you’ll get your money back if something happens.
Invest in a GIC
Guaranteed Investment Certificates (GICs) have terms ranging from 30 days to 10 years and provide a guaranteed return, but you can’t withdraw money before it matures.
- Guaranteed returns. When you park your money in a GIC, you earn a fixed-rate, guaranteed return.
- Locked-in rates. You don’t have to worry about your rate of return fluctuating when you invest in a GIC.
- Good for short-term goals. GIC terms start at 30 days, making them a good investment option for short-term goals.
- Penalty for early withdrawals. If you need to access your funds before the maturity date, you’ll pay a penalty.
- Rates and fees vary by institution. Financial institutions set their own fees and minimum deposits, so you’ll need to shop around for the best rates.
- Low interest rates. GICs offer guaranteed returns, but they typically produce lower returns than bonds, ETFs and stocks.
Invest in an RRSP
If you’re looking to save for retirement, you can get a jump start by opening a Registered Retirement Savings Account (RRSP).
- Tax-free growth. You fund an RRSP with pre-tax money, so it can grow in the account without being subject to tax.
- Use funds for qualifying expenses. You can withdraw funds before you turn 71 for qualifying expenses, such as your first home (through the Home Buyers’ Plan) or certain educational expenses (through the Lifelong Learning Plan).
- Low contribution limit. You can’t contribute more than $6,000 a year to a Roth IRA.
- Required minimum distributions. By the time you turn 71, your RRSP must be converted to a Registered Retirement Investment Fund (RRIF), so you can start making withdrawals.
- Withdrawals are taxed. Withdraw from your RRSP must be declared as part of your income and are subject to income tax.
Invest with a robo-advisor
Want some guidance on how to invest? You may benefit from opening an account with a robo-advisor.
- Affordable. Most robo advisors have minimal fees and minimum investment requirements.
- Diversified investments. Robo-advisors use low-cost funds to keep your investments diversified.
- Hands-off investing. Most robo-advisors maintain your portfolio by performing routine tax-loss harvesting and rebalancing.
- Technology varies. Some robo-advisors are less advanced than others.
- Managed by a computer. If you prefer face-to-face discussions about investing, this may not be the best option.
- Limited advice. Robo-advisors work based off an algorithm, so they don’t offer personalized investments.
There are many ways you could invest $1,000. Set aside time to determine your goals, timeline and risk tolerance. Then do your homework and compare your investment options before jumping in.
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