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Even if $1,000 doesn’t seem like much, there are plenty of ways to invest that money and establish a fruitful portfolio.
You can spend $1,000 in countless ways, but investing your extra money is always a good option. Yes, there are uncertainties with every investment. But investing is one of the best ways to accumulate wealth over the long term.
If you’ve got $1,000 to spend, here are four solid investment ideas to consider right now.
Why it’s a good option now: Many experts agree that the stock market is healthy, and they see potential for continued growth throughout the remainder of 2021. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite Index have grown significantly since this time last year, up more than 21%, 26% and 26%, respectively.
In other words, if you’re eager to start trading, now could be a great time to jump in. Plus, many brokers ditched commission fees in the last few years, which were often between $5 to $7 per trade. After a handful of trades, that $1,000 would be eaten up quickly by fees. But commission-free trading of stocks, ETFs and options is the new normal, so you can invest that $1,000 entirely without worry.
Some brokers that offer commission-free trading include:
What to watch out for: Each broker has a different policy on commission-free trading, where some stocks qualify and others don’t. For instance, TD Ameritrade offers commission-free trading, but it only applies to US exchange-listed stocks, ETFs and options. If you want to trade over-the-counter stocks, expect to pay a $6.95 fee per trade.
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
| Available asset types | Stocks, Options, ETFs, Cryptocurrency |
|---|---|
| Stock trade fee | $0 |
| Option trade fee | $0 |
| Annual fee | 0% |
Why it’s a good option now: Fractional share investing has emerged over the last few years as a popular investing strategy for those new to the stock market. Apps have made it easier than ever to buy a portion of a stock that would otherwise be too expensive, making stocks that trade at hundreds – or even thousands – of dollars accessible to beginner investors. Plus, it allows you to divvy up that $1,000 across a variety of companies and build a diversified portfolio in the process.
Some popular platforms that offer fractional share investing include:
What to watch out for: Not all brokerage firms offer fractional share investing. You’ll also want to make sure the broker you decide to go with doesn’t charge commissions on trades because those costs can add up quickly.
Why it’s a good option now: An HSA, or health savings account, is a tax-advantaged account that allows you to make tax-deductible contributions and tax-free withdrawals, so long as you use the money for medical expenses. Unused money and interest are carried over from year to year, and many HSAs allow you to invest some or all of your HSA balance into mutual funds, ETFs and even individual stocks. For 2021, the maximum you can contribute to an HSA is $3,600. As an aside, you may be able to use your HSA for non-medical expenses in retirement.
What to watch out for: You can only contribute to an HSA if you have a qualifying high-deductible health plan (HDHP). For 2021, health plans with a minimum deductible of $1,400 for an individual and $2,800 for a family qualify as an HDHP.
Why it’s a good option now: There’s no denying that the real estate market is hot right now. We’re seeing new records throughout the country as home prices continue to climb. So now could be a good time to get started investing in real estate.
With $1,000, perhaps the easiest way to do it is through real estate investing platforms like Fundrise or DiversyFund. Both allow you to invest in real estate investment trusts, which are basically companies that own income-generating real estate. And both have account minimums of just $500.
What to watch out for: Interest rates on mortgages are at the lowest they’ve ever been, but the housing boom could plateau when rates rise again. That doesn’t mean there’s a housing bubble that will burst but rather a boom that will come to an end. So returns on real estate investments could slow down or pull back.
While it may look like a small start, $1,000 given time can grow into an impressive sum. Here’s a look at how it might grow in three common investment classes, without saving another penny.
| $1,000 saved or invested | Savings account | Bonds | Stocks |
|---|---|---|---|
| 1 year | $1,010 | $1,060 | $1,100 |
| 5 years | $1,051 | $1,338 | $1,611 |
| 10 years | $1,105 | $1,791 | $2,594 |
| 15 years | $1,161 | $2,397 | $4,177 |
| 20 years | $1,220 | $3,207 | $6,727 |
| 25 years | $1,282 | $4,292 | $10,835 |
| 30 years | $1,348 | $5,743 | $17,449 |
For this table we assumed a 1% annual return on a savings account, CD or money market fund (which is optimistic these days); an average 6% return for bonds or bond funds; and 10% on the stocks, the market’s long term annual return. Bond returns vary widely based on bond types, and the stock market has down years while individual stocks can even go to zero. So consider these benchmarks only and consider risk as well as return.
They might not be as exciting as investing in the stock market, but here are a few smart money moves you could make right now with that $1,000 instead of investing it.
Only you can decide where to invest your money, and the options provided above may not be the best places to park your $1,000 – and that’s okay. Here are two alternative investments to consider.
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