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How to invest $1,000

Turn that stash of cash into even more money.

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Cassidy Horton
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Are you wondering how you can take $1,000 and turn it into even more money? Here are the five best 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:

Investment typePercentage
CDs and bonds15% to 40%
Stocks, ETFs and mutual funds50% to 75%
Peer-to-peer lending, real estate and alternative investments0 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 come out ahead if you pay this down before you invest.
  • Create an emergency fund. Prepare for the unexpected by keeping three months 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 in a stock or fund

Stocks and funds give you the opportunity to pick and choose individual investments for your portfolio. If you’re new to investing, consider a blue-chip or name-brand stock. These tend to be big, well-established stocks with a solid performance history and consistent returns.

Or explore index funds and exchange-traded funds (ETFs). By investing in a fund, you own a small piece of many stocks instead of just one, because funds contain baskets of stocks that track major industries or market indexes. Because they hold a collection of stocks, funds offer more diversification and can help protect your portfolio from market volatility.

To invest in a stock or fund, you’ll need a brokerage account. Compare your options by research tools, fees and any other feature that may impact your trading experience.

Name Product Asset types Option trade fee Annual fee Signup bonus
Firstrade
Firstrade
Stocks, Bonds, Options, Mutual funds, ETFs
$0 + $0/contract
0%
Get up to $200 in transfer fee rebates
Open an account and transfer at least $2,500 in securities
Firstrade customizable trading platforms let you manage your account and trade from your desktop, iPad or mobile phone.
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More Info
Webull
Webull
Stocks, Options, ETFs
$0
0%
Get one free stock valued between $3.00 and $300 when you open an account, one more with a deposit
Open an account
Margin financing rates start at 3.99%. No monthly subscription fees for margin.
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More Info
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Invest in peer-to-peer lending

Lend your money to other individuals in need through peer-to-peer (P2P) lending.

Pros

  • Lucrative returns. The average investor earns 6% 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.

Cons

  • 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 of 2008, so it’s hard to tell how it will do during the next economic downturn.
  • Unsecured loans. 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 CD

CDs have three-month to five-year terms and provide a guaranteed return, but you can’t withdraw money before it matures.

Pros

  • Guaranteed returns. When you park your money in a CD, 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 CD.
  • Good for short-term goals. CD terms range from three months to five years, making them a good investment option for short-term goals.

Cons

  • 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. CDs offer guaranteed returns, but they typically produce lower returns than bonds, ETFs and stocks.

Our top pick: CIT Bank Term CDs

  • Lock in an interest rate
  • Tap into for retirement income
  • FDIC insured

Our top pick: CIT Bank Term CDs

Choose from a range of terms with no maintenance fees and $1,000 minimum to open.

  • No maintenance fees
  • $1,000 minimum to open
  • Daily compounding interest
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Invest in a Roth IRA

If you’re looking to save for retirement, you can get a jump start by opening a Roth IRA.

Pros

  • Tax-free growth. You fund a Roth IRA with after-tax money, so your earnings and withdrawals are tax-free.
  • Use funds for qualifying expenses. You can withdraw funds before you’re 59.5 years old for qualifying expenses, such as your first home or educational expenses.
  • No required minimum distributions. You don’t need to take out your money by 70.5 years old because you pay taxes on them up front.

Cons

  • Low contribution limit. You can’t contribute more than $6,000 a year to a Roth IRA.
  • Income requirements. You may not qualify for a Roth IRA if you make more than $124,000 a year.
  • Self setup. Roth IRAs aren’t offered through your employer, so you’ll have to open this account yourself.

Invest with a robo-advisor

Want some guidance on how to invest? You may benefit from opening an account with a robo-advisor.

Pros

  • Affordable. Most robo-advisors have minimal to no 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.

Cons

  • Technology varies. Not all robo-advisors are as advanced as 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.
Robinhood

Our pick: Robinhood

Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.

  • Easy-to-use interface
  • No commissions or minimums
  • Great for beginners
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on Robinhood's secure site

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More details
Available asset types Stocks, Options, ETFs
Stock trade fee $0
Option trade fee $0
Annual fee 0%

Bottom line

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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