The possibility of receiving a check from the $2 trillion stimulus package is very likely. Nearly 90% of Americans qualify and they will receive $1,200 for individuals, $2,400 for married couples, and an additional $500 per child.
For many people, this is a lot of money. It can be very tempting to just spend it on meaningless things, but I encourage you to do more with it than just that.
While this amount of money is not going to make or break you in the long run, it could be the catalyst into your retirement funding, it can bring you monthly cash flow, and it can start your journey to become financially independent.
The investment strategies I am going to share with you work in any market – if you have $1,000 to invest, follow the advice below or focus on saving money to reach that $1,000 mark.
Before you start investing your $1,000 make sure you have a solid financial base and have reserves for an emergency fund. If you don’t have an emergency fund built up yet, we recommend that you open a high interest savings account. There are many online bank options for high interest savings accounts – check out RatePro to view some of the best options.
Once you have that safety net, take the plunge and start your investing journey today!
Strategy #1 – Mutual Funds and ETFs
Mutual funds and exchange-traded funds (ETFs) have many things in common. Both consist of many different assets allowing investors to diversify. However, there are some slight differences to be aware of.
ETFs are traded like stocks, while mutual funds can only be bought at the end of each trading day based on a calculated price. Moreover, mutual funds are actively traded by a fund manager who makes decisions about how to allocate assets. Conversely, ETFs are usually passively managed by following a certain market index.
One thing to note with mutual funds, certain funds such as the Vanguard 500 Index Investor Fund, requires a $3,000 minimum investment. This limits your options slightly, but there are lower entry funds, like The Growth Fund of America, offered by American Funds, that only requires a $250 investment.
There are many different options when choosing mutual funds and ETFs. It is best to speak with a financial advisor and select an option that is right for you. While this is not the most exciting way to invest your $1,000 it is usually pretty safe, especially over the long run.
Strategy#2 – Start a Roth IRA
Start a Roth IRA. This is an awesome retirement vehicle that gives you tax break on the money you withdraw from the plan during retirement. A Roth IRA also allows you more control than a standard employer-sponsored retirement account. Some of the main benefits of Roth IRA include:
- You are able to withdraw the money you contributed any time, without taxes or penalty
- You can simultaneously invest in a Roth IRA along with your 401(k). In 2019 and 2020, the Roth investment limit is $6,000 per year or $7,000 if you’re older than 50.
- You can choose when and how much you contribute to your Roth IRA. Meaning you can put the entire $6,000 in the first day of the year or you can split it up over the year.
- The investment timeframe goes up until the tax deadline every year
- At 59 ½, if held for at least five years, you can take distributions without paying federal taxes
- A Roth IRA has no age limit and you can start one as long as you have earned income.
If you haven’t started a retirement account, considering putting your $1,000 in a Roth IRA. There are certain income limitations, however, there are some options around that. Talk with a financial advisor to see if you qualify for one and to learn more.
Strategy #3 – Real Estate Investing (REITs)
While $1,000 is not enough to buy a property the traditional way and rent it out for cashflow, it is enough to invest in REITs.
This strategy allows you to invest in other people’s real estate investments without the hassle of managing a property and dealing with tenants.
There are many options to get started investing in REITs, but the easiest and most popular way is through Fundrise. With a $500 minimum contribution, you can start investing in their starter portfolio, which will diversify your money into several different REITs.
Another great thing about Fundrise is their average annual fee for their investors is extremely low compared to other REITs. Not only that, their trailing 20-year annual return is right around 12.3%.
If you are looking for a quick and easy way to diversify your investment portfolio with $1,000, a REIT is a great option to start investing in real estate.
Strategy #4 – Peer to Peer Lending
Peer to peer lending has been on the rise lately, especially with easy to use services like Lending Club. Basically, peer to peer lending is crowdfunding for loans. Each person who contributes money will get paid back interest on their investment.
Lending club requires a $1,000 minimum investment and they will diversify your overall investment portfolio by spreading your investment across multiple borrower loans, within your LendingClub account.
On average, Lending Club has seen historical returns average around 4-7%. You also receive monthly payments of both principal and interest, unlike most fixed income securities.
This is another great option to diversify your investment strategy with $1,000.
Strategy #5 – Start A Side Hustle
If you have some extra time, starting a side hustle with your $1,000 is a great way to earn consistent money. I’ve talked about side hustles in other posts because I believe they are one of the best ways to make extra income.
With $1,000 you can start a wide variety of side hustles. As a matter of fact, many don’t require any money to get started.
The best thing to do when starting a side hustle is to focus on what you are passionate about. Do you like working on the computer, working outside, photography, or helping others? By choosing something you are passionate about, you will enjoy the work more and you will be more likely to keep it up over time.
A side hustle I started in high school and my freshman year of college was a moving business. I loved helping others and I knew this would take minimal cash to get started. Maybe you enjoy being outside during the summer. A great side hustle you could start with $1,000 is a lawn care business.
Whatever you choose to do as your side hustle, make sure you are passionate about it. Take time to think about what you want to do before you jump in. Don’t make the mistake of trying several things, just to end up stopping them a couple of months later. This will waste time and money that you can’t afford
Choose one thing, stick with it, and you will be much farther along over time.
There you have it, you now have five ways to invest $1,000. While this is not an expansive list, it involves some awesome tried and true methods of investing your $1,000.
Whatever way you choose to invest your money, pick one thing and stick with it for a several months. Give your money time to grow and allow yourself to become an expert on your investment strategy. With that established base, you can then diversify into other investment strategies.
Remember, make your money work for you. You’ve heard this before because it is the absolute truth. By having your money do the work, you can gain your time back and enjoy the things you love to do.
What other ways do you suggest to invest $1,000? Let’s hear about them, comment below!