Finding the best way to invest $1000 as a new investor can be a challenge. You may be excited to start investing your money in the stock market and may be wondering “where to invest” or “what to buy”, but there are many variables to consider. Below, we will discuss what to do with 1000 dollars and the best investments for beginners looking to grow their money.
Before You Start Investing Your Money
Investing your money is the best way to build wealth and save for retirement. However, investing your 1000 dollars may not be the first step for everyone looking to strengthen their personal finances. For example, have you already paid off any high-interest debt or created a healthy savings account or emergency fund?
The stock market has historically returned, on average, a little over 10% per year for the last 100 years, but if you have high interest credit card debt, then you’d get a better return on investment (ROI) if you paid off your bills. Needless to say, the opposite would be true about paying off your mortgage early. If you have a mortgage interest rate of 5%, then you should probably invest your money in a low-cost index fund, continue making your mortgage payments, and save the difference for retirement or future investment.
If these financial needs have been covered and you’re trying to figure out how to start investing with as little as $1000 or $2000, you’ll need to find a brokerage firm with a low minimum account requirement.
Where To Invest $1000
The good news is that you still have quite a few options for investing – even with $1,000 or less. Certainly, while it would be nice to start out with a larger sum, the truth is that you really don’t need a lot of money to begin. When it comes to investing, starting early is more important than starting with a million dollars. In addition, depending on how well your investments perform, you could grow your $1,000 into a substantially larger amount within a relatively short period of time.
One reason for this is the power of compounding. This concept allows your investment gains to grow on top of past gains – ultimately snowballing your funds over time. For investors who get started early and take advantage of time and compounding, it is possible to build up a million dollar investment portfolio by investing just a small amount of money in your 20s and 30s.
While many of the “traditional” brokerages such as Fidelity, Schwab, and Vanguard require higher minimum balances, there are still a number of online discount brokers that are open to investors who have as little as 1000 dollars to invest.
Best Brokerages For Investing
Wealthfront is one of the best robo-advisors for new and beginning investors. The company offers algorithm-based virtual wealth management services online, similar to Vanguard, Fidelity, or Schwab, but without human financial planners. Using a series of questions to gauge your savings and retirement goals, investment needs, and risk tolerance, Wealthfront creates a diversified investment plan comprised of low-cost mutual funds and ETFs (exchange-traded funds).
While you can always change the allocation of funds to each ETF, the investment mix is optimized and diversified across multiple asset classes and geographies, giving you the ability to invest in U.S. and foreign stocks, emerging markets, dividend-paying companies, commodities, and bonds.
By leveraging technology and avoiding human intervention, Wealthfront is able to provide investment advice with low fees, making them cheaper than traditional financial advisors. The best part is that the minimum balance requirement is only $500, and when you sign up through BDB, the first $15,000 in assets is managed for free.
Betterment is also included in the growing group of robo-advisors that are becoming popular today. Like Wealthfront, one of Betterment’s biggest claims to fame is that it both simplifies and automates investing for the masses. This platform has started to change the way that investing is done by offering “virtual” financial advice to non-affluent individuals who would otherwise not have access to wealth management.
Similar to Wealthfront, Betterment asks you about your age, income, and investment goals, such as building a safety net, saving for retirement, or general investing. Afterwards, the company recommends a globally diversified stock and bond portfolio to target your needs.
There is no minimum account balance required to start investing with Betterment. However, the company’s pricing structure is higher for smaller accounts and lower as you grow your portfolio. For this reason, we recommend Wealthfront over Betterment if you are investing less than $100,000.
For a cross between the traditional discount brokerage and the new robo-advisor, Motif Investing offers a unique take on investing. With Motif Investing, as opposed to directly investing in individual stocks, you can actually create your own fund of up to 30 stocks, index funds, or ETFs for only $9.95. Similarly, the fee to trade individual stocks with Motif is also among the cheapest in the industry, coming in at just $4.95 per trade.
The best part is that the community of investors who use Motif’s platform can be an excellent resource for beginning investors. For example, say you want to make a bet on shale oil and gas, China’s internet boom, the robotic revolution, or medical devices – Motif has pre-made portfolios targeting each industry and niche that you can readily invest in. Furthermore, if you don’t like a particular company in the basket, you can always remove it or add another security of your choice.
Motif Investing does not have a minimum account balance requirement either, making it easy to open your account and begin trading today.
Start Investing Now
Regardless of whether you have $500, $1000, or $10,000 to invest, there are plenty of excellent options available to you. Once you have chosen the best brokerage account for you, you can focus on contributing more to see your investments grow. The goal is to automate the investing process so you can focus on what you do best – whether that’s building a career or being an entrepreneur.