If you’ve got an extra $1,000 by some miracle, or perhaps thanks to COVID stimulus holdovers, it may not seem like much, but there’s no reason it can’t be the seedling of your first investment portfolio.
Perhaps if you’ve got serious debt to pay down, it’s better to do that first, but if not, there are plenty of places to park $1,000 that will make it grow rather than collecting dust in a savings account, or worse yet, under the euphemistic mattress.
And since zero-fee trading platform Robinhood descended on the Earth to democratize trading for the little people, retail investing--even when you don’t know what you’re doing--is all the rage.
The markets started to tank in March because of the COVID-19 pandemic but has also created an army of young investors that started investing out of boredom due to stay-at-home and lockdowns.
All major online stock trading platforms have seen a surge in demand in recent months, leading to a major spike in new accounts in the first quarter. Many of the new users are young or even first-time investors with over half of them aged 34 or younger. In fact, online brokers saw new accounts grow as much as 170% in the first quarter.
Recent studies show that 29% of wealthy investors are under the age of 50 and control 37% of investable assets. So, why not you?
That $1,000 you have right now could grow into years of great future financial choices.
Here are some tips for the best ways to invest $1,000 right now:
A cool grand is not too shabby if you want to start with micro-investing. With new apps (such as Robinhood) on the market, you can even start investing with as little as $5. Squirreling away even $5 a week, for instance, creates a savings/investing habit and you won’t even miss the cash.
And if you want the ease of stock trading with diversification benefits of mutual funds, you should take a look at micro-investing apps that allow you to invest in exchange-traded funds (ETFs)--entire “baskets” of stocks centered around various themes.
Or give Public a try. It’s an easy-to-use app with more than 5,000 stocks to choose from and simple investment language for the novice. After you choose your stocks, just sit back and wait for the market to do the rest. But never invest money you aren’t prepared to lose, and if you’re betting on fairly stable stocks, you don’t lose until you sell. If you see it dip, just ride it out.
Acorn is another great choice if you have trouble finding the cash. By linking your credit card and checking accounts, this micro-saving app rounds up your purchases to an even number while investing difference for you in an Acorns account that you set up. You can also invest another small but consistent amount of money each month by setting up an account. With deposits with round-ups, you could make a little fortune.
#2 Buy Bitcoin
Trading at ~$11,370 at the time of writing, Bitcoin is definitely an investment you should consider for your extra $1,000. If it’s the only extra money you have, don’t put all your eggs in this single digital basket, but you can buy and sell bitcoin on Robinhood, though this won’t give you actual bitcoin for a wallet that you can use.
Plenty of people were waiting for bitcoin to drop from its high of 12,000 this week, planning to buy on the dip. But keep in mind that fundamentals don’t really apply here and it doesn’t really follow the rest of the market, so it’s a big gamble on the future of currency.
Still, if you want to hold an asset resistant to inflation, this global digital currency offers an exciting opportunity to delve into an entirely new asset class. And when you get tired of it, you can always easily trade it for cash or maybe gold with very low fees.
#3 Peer-to-peer lending
A lesser known way to invest your $1,000 is a newly emerging craze called peer-to-peer lending.
This relatively new non-bank banking concept is a way of making loans and returning the proceeds of those loans to investors through an online service, just without the "middle man".
P2P platforms like LendingClub and Prosper allow you to invest directly in the loans taken out by borrowers instead of investing your money through a bank in the form of money market funds and certificates of deposit. Loans are determined by credit grades, based on many factors such as the borrower’s credit score, income, amount, purpose and term of loan.
Using these platforms, yield-seeking investors provide unsecured loans to consumers and in turn they get an average annual return of 7,9 or 11 %. Not a bad way of getting the most out of your money compared to disappointing rates of savings and bonds.
#4 Robo-Advisors There is no easier way to get started in long-term investing than with robo-advisors, a software platform where a computer algorithm allocates your funds to a portfolio of algorithmic design. Most robo-advisors require just $500 or less to start investing and charge very modest fees.
Aside from the cash, all you need is to answer a few questions about your investment style and robo-advisors will create and manage an investment portfolio based on your individual needs and financial goals.
#5 Real-Estate Crowdfunding
Do you have a hankering for real estate but no money to buy it. Now there’s a way to get in on this without tons of cash.
For a small amount of money you can invest in big projects. Basically you team up with other investors and invest in real estate where you can pick a single property or invest in a fund.
So, maybe it’s not quite time for you to start investing. No worries: There are other ways to put your $1,000 work for your financial stability and health.
Whenever you have extra cash, you should consider paying off your high-interest debt as soon as possible. Even if your debt is higher than $1,000, it will still move you on the path towards financial freedom.
According to the latest data, credit-card loans crossed the $1 trillion mark, reaching $1.08-trillion in Q3 of 2019. Each household carries just under $9,000 in credit card debt with total consumer debt sitting at $13.86 trillion.
With average APR on credit cards 17.28% it's getting harder to get rid of this financial burden. If you are one of those with huge debts on credit cards then this would be a great place to start.
Paying down your mortgage is another good use of your $1,000. Mortgage balances rose by $120 billion in the fourth quarter to $9.56 trillion. Although mortgage interest rates are much lower than credit card rates, the length of a mortgage is generally much longer, usually 30 years. So you should put your money towards your mortgage principal, not the interest because extra payments to the principal would reduce the amount of interest you will owe later on.
Another great idea is simply to invest in yourself. Take a course that furthers your career or spend it on wellness because financial and physical health often go hand in hand.
By Michael Kern for Safehaven.com
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