Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
How to invest $1,000
Turn that stash of cash into even more money.
Updated
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.
What's in this guide?
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 type | Percentage |
---|---|
CDs 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 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.
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.
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.
Our pick: Robinhood
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
- Intuitive interface
- No commission fees
- No minimum account balance
Available asset types | Stocks, Options, ETFs, Gold/Commodities |
---|---|
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.
Frequently asked questions
More guides on Finder
-
The best debit cards for kids for 2021
Support your child’s financial knowledge and teach the important real-life money skills in a safe and controlled way with a kids’ debit card.
-
SoFi Invest alternatives
Check out apps like SoFi invest offering many of the same benefits and then some.
-
Investing strategy: How growth stocks can make you money
Learn how to strategically find and invest in booming companies.
-
10 Tips from Women Investing Experts
Finder spoke with 10 women investors who shed some light on helpful tips and tricks to start your investment journey.
-
7 places to find investment advice
Tips for beginning investors and high net-worth individuals alike.
-
Vanguard competitors
If you’re looking for a broker comparable to Vanguard, check out these five contenders.
-
5 key TD Ameritrade competitors
Thinking of switching from TD Ameritrade? Here are 5 apps like TD Ameritrade that offer valuable benefits.
-
Apps like Acorns
Acorns alternatives offer lower fees and more investment options. Learn more.
-
Investing in your 30s: 8 wealth-building tips
Prepare to revamp your asset allocation and explore new investment classes.
-
How to start investing in your 20s: 7 tips for beginners
7 tips for starting a portfolio if you’re new to investing.
Ask an Expert